Each company deserves its own high pay commission

By Andrew Hill

Published: August 18 2009 03:00 | Last updated: August 18 2009 03:00

Add my name to the list. A high pay commission is a good idea. In fact, it's such a good idea, let's impose one on every company in the land.

Like the Low Pay Commission, each committee would be drawn from a deep pool of knowledge and experience. Before making recommendations on pay, members of these committees would carry out extensive research and consultation, drawing on outside expertise where necessary, sharing best practice. They would talk to owners and staff. They would look at compensation around the company, the country and, where relevant, the world. Above all, members of these committees would look at performance. How do top executives compare with rivals, not just financially, but in terms of respect for the environment, safety and other relevant benchmarks?

These high pay commissions would have the edge over the LPC. They would be democratically appointed. They would be subject to regular votes on their policy, and individuals on their performance. So, incidentally, would the officers whose salaries and bonuses the commissions had approved. If excessive pay undermined the company or caused a customer backlash, they would face sanctions from pension schemes, local authorities and individuals.

Idealism? No. Institutional investors and remuneration committees got it wrong. They need to be far more attentive and rigorous. But the current system can work and should continue to work, even after the economy recovers and pressure on share prices eases. If the threat of messy, counter-productive legislation to cap pay has any impact, it should be to give our ready made company-specific "high pay commissions" a huge incentive to get it right next time.

andrew.hill@ft.com To comment, visit www.ft.com/lombard