Partner Article

Call for executive pay to be performance linked

The CBI has called for further action to ensure high executive pay packets are linked to performance.

In response to the Government’s discussion on executive pay, the business group has categorically stated that pay must be squarely linked to performance with no rewards for failure.

It has outlined a number of areas where the level of transparency of the remuneration process could be strengthened, including transparency on the criteria used to set rewards; executive pay to be considered as part of the broader business pay strategy; and withholding performance-related pay in cases of poor performance.

Chief policy director at the CBI, Katja Hall, said: “High pay is only ever justified by outstanding performance.

“The current system of corporate governance is a robust mechanism for setting executive pay when it’s applied consistently and effectively, and there are ways it could be strengthened further.

“Remuneration committees have critical role to play in ensuring that pay is always squarely linked to performance.

“We believe remuneration committees should be bolstered by widening the pool of non-executive directors that serve on them and giving them greater scope to reduce or withhold rewards in cases of poor performance.”

The lobby group suggest that remuneration committees should examine the practicalities of greater use of measures to reduce or withhold performance-linked reward where business performance is not sustained in the longer term.

It also encouraged RemCos to share best practice and widen the pool of non-executives involved in decision making.

This was posted in Bdaily's Members' News section by Tom Keighley .