It would be terribly convenient for the right wing and big business to argue that fuss over directors' pay was all left wing, and driven by the High Pay Commission. But that's not true. As the FT reports this morning:
Shareholders and industry trade bodies have thrown their weight behind calls for radical reform to executive pay and restraints on spiralling remuneration packages.
Legal & General Investment Management, one of the largest investors in UK shares, said: “LGIM is happy to reward good long-term performance but there is a disconnect between shareholder value and remuneration”. Sacha Sadan, head of governance at LGIM, said: “It is up to shareholders to come up with a constructive solution to the problems”.
The Association of British Insurers, which speaks for about a sixth of UK investors, said executive remuneration had become too complicated and that remuneration reporting had to be improved. It also said about shareholder votes on pay, which are not binding, “we do not believe companies take it seriously enough”.
So let's stop for a moment and point out the obvious - that shareholders can vote to stop this abuse.
So it's time they did so, now.
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It is telling that the most aggressive shareholders in UK companies tend to be the US based ones. That is probably due to fact that many UK fund managers are too scared to upset the apple cart esp when the management went to the same narrow Univerisities or schools they went to. Probably part of the reason why so many of the hedge fund managers in London aren’t British too.
For once I tend to agree with you
Pension funds should be sacking their managers, left, right and centre
In one sense, executive pay is a contract between two private parties and has nothing to do with us unless we are one of the parties. The second issue is that I notice that Warren Buffett owns part of a bank, Wells fargo, and that executive pay in this bank never came close to the likes of Lehman or even AIG. perhaps the issue is that companies need a powerful shareholder, I notice that building societies who became banks have mostly been destroyed the shareholder base were millions of people owning small amount of shares they had no real voice or power.
Before the credit crunch we were always told that companies had to pay high salaries to attract talent from all over the world, this is obviously shown to be nonsense. and we could ask how many people running banks have been head hunted ? zero on Andrew Neils program there was a good discussion about this with Xavier Portillo and postman Johnson.
link to bbc iplayer studio discussion starts at 8.50
http://www.bbc.co.uk/iplayer/episode/b017t36v/This_Week_24_11_2011/
Pension funds should make management pay activism part of their requirements for running the money, much like many have guidance around tobacco, defense etc. They should push to have cash salaries limited for management with all other remuneration in the form of long-term share schemes which tie management interests to shareholders. If management make shareholders lots of money, then they can earn lots of money otherwise they don’t. Plus I would like all staff to get shares, I once dealt with a company where the receptionist bought a house in cash from the shares she got whilst at the company.
@ larry Levin
@ larry Levin
“Before the credit crunch we were always told that companies had to pay high salaries to attract talent from all over the world, this is obviously shown to be nonsense. and we could ask how many people running banks have been head hunted”
That is unfortunately not entirtely true given the fight at the moment between the two taxpayer owned banks to employ Nathan Bostock, plus Lloyds having to offer a fortune to poach people from Santander. At least at Lloyds cash bonuses are now severely restricted, management make money if the shares go up and then so do we.
Do we need a risk expert Bostock to tell us that 40 times leverage is too much, or that 125% northern rock mortgages are something you perhaps should not do? I seem to remember that people inside some of these banks tried to warn the board but were threatened.