Belfast Telegraph

Wednesday 16 April 2014

Call to reform executive pay bodies

A think-tank has called for the end of the 'old boys' network' on remuneration committees

Campaigners have called for an end to the "old boys' network" on committees which set pay for executives after new research showed that almost half were made up of current or former bosses.

A study of firms in the FTSE 100 found that of 366 people who sit on remuneration committees setting pay for top bosses, just 10% were not from business and only 16% were women.

Almost half of those on remuneration committees were current or former company executives, according to the study by the High Pay Centre think-tank.

Spokeswoman Deborah Hargreaves said: "In the UK we have a system designed and run by people with an apparent vested interest. They fall victim to 'group think', setting ever higher packages based on what they know is paid in other top companies creating a ratcheting effect on top pay.

"We know that top pay is completely out of step with public opinion. The committee which sets this top pay is, in effect, a closed shop. In handing out ever greater rewards they are damaging public confidence in business and distorting the market.

"Remuneration committees must be opened up to a broader membership to restore some common sense to decision making on top pay."

Chuka Umunna, shadow business secretary said: The High Pay Centre's research reinforces the need for greater transparency, accountability and fairness in setting executive pay, and specifically for reform of the way in which remuneration committees operate."

A Department for Business spokesman said: "At the start of the year the Government announced proposals to curb excessive executive pay, which was the most comprehensive reform of governance on directors' pay in almost a decade.

"It is important that we encourage greater diversity on remuneration committees. That is why we have already taken action to broaden the membership base through encouraging head-hunters to look beyond existing board members, requiring companies to report on their boardroom diversity policy from October this year, and adopting Lord Davies' recommendations designed to boost the proportion of women on boards.

"We have made it clear that while we prefer a voluntary approach, mandated diversity measures will follow if progress is inadequate."

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