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Executive Remuneration needs clarification, say CBI

The Government needs to make legislation surrounding executive remuneration clearer for businesses, according to the CBI.

Responding to the Department for Business consultation of shareholder voting rights, the CBI called for the links between executive remuneration and performance to be made clearer, and in some cases strengthened.

They also expressed support for the publication of a single figure for directors pay.

Commenting on the consultation, CBI chief policy director Katja Hall said: “Only by first getting the facts right can we have a meaningful debate and enable shareholders to hold boards to account. For instance, last year pay for Chief Executives rose by an average of 10%, not 49% which has been widely reported.

“Companies should always demonstrate how executive pay links to company strategy. Recent claims that there is no link between executive reward and company performance are misleading.

The median rate of growth in profit for FTSE 100 companies since 2003 has been more than twice the median growth rate of chief executive remuneration over the same period.“

The CBI believe that improvements to transparency are best tackled through the UK’s corporate governance framework, but current proposals by the Government confuse the role of shareholder and management. The blurring of responsibilities means the shareholders could micro-manage companies, resulting in slower and less effective decision making.

Ms Hall continued: “These proposed changes are even more perplexing given the recent introduction of annual elections for all directors, including those on the remuneration committee.

“This gives shareholders the power to remove members of the remuneration committee if they are not satisfied with their actions.

“Reforms on executive pay should focus on greater transparency, stronger links to performance, bolstering the role of remuneration committees, and giving shareholders the right information and powers to hold Boards to account.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .