By Marcus Leach
Company Boardrooms across the UK will be concerned by the PM, David Cameron’s announcement this weekend that shareholders would be given the vote on executive pay in an attempt to deal with executive excess.
Speaking on the BBC’s Andrew Marr programme the PM talked about “market failure” where bosses were getting huge rises despite their poor performance.
Leading HR expert and advisor to senior business leaders in the Financial Services industry David Barr argues:
“The root cause of the problem is far bigger than executive pay and requires a root and branch overhaul of performance management and its link to pay and bonus arrangements.
“Businesses themselves need to drive this forward with company leaders needing a complete rethink of the behaviours and unintended consequences built into many of today’s performance management and reward systems. They need to dismantle existing strategies and implement simple, transparent ways that build cultures and behaviours that add value for employees, customers and shareholders that ultimately create more stable, sustainable businesses for the future.
“With strategies that place the customer and value creation front of mind rather than pay and bonus we will have a chance to create the stable foundations that will ultimately be in the interest of shareholders and society at large.”
John Cridland, (Confederation of British Industry's (CBI) Director-General said that executive pay must remain fair, especially given the current economic climate.
“At a time when family and Government budgets are under great pressure, it is important that executive pay is seen to be fair," he said.
“The CBI wants to see a single figure setting out total pay for senior executives; clear links between levels of pay and performance, and if performance falls short, deferred pay or claw-back arrangements in place, so there are no rewards for failure.
“Government concern on this issue is understandable, but prevention of the problem has to be the answer. Binding shareholder votes would simply be shutting the stable door after the horse has bolted, as shareholders would only be voting after the problem has happened.”
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