IoD: UK business "damaged" by excessive executive pay
Saturday, 26 November 2011 03:44
The Institute of Directors (IOD) has attacked executive pay levels as “unsustainable” saying that the “legitimacy of UK business in the wider society is significantly damaged.”
Simon Walker, the IoD director general said that although he understood the difficulty that remuneration committees for large UK businesses have in attracting the right candidates was one reason for the dramatic increases in pay for top executives, too often pay was not linked to the performance of the companies.
The IoD has put forward proposals to the Department for Business, Innovation and Skills, headed by Vince Cable, who have been conducting a consultation on executive pay which ended on Friday 25th November.
The IoD called for wider diversity amongst non-executive directors who would be more likely to take an objective view on pay than former high level executives, the introduction of a binding shareholder vote on executive remuneration policy and the simplification of executive pay.
Simon Walker said: “A higher level of professional diversity amongst independent non-executive directors will assist boards in aligning executive pay with society’s expectations. Shareholders should also play a more active oversight role.”
The report also calls for greater transparency over potential conflicts of interest experienced by remuneration consultants and recommends more involvement from employees across different levels of the business in negotiating pay.
Mr Walker said: “Remuneration committees should explore ways of engaging with employees on remuneration policy. This will be important in increasing the legitimacy of executive remuneration in the eyes of wider society.”
The recommendations from the IoD follow last week’s report from the High Pay Commission (HPC) that said the gap in pay levels between the top and bottom levels of companies is excessive and could cause social unrest.
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