The Shareholder ForumTM

reconsidering

"Say on Pay" Proposals

Forum Home Page

"Say on Pay" Home Page

Program Reference

 

For the study of UK compensation trends raising the issues addressed in the column below, see

 

Financial Times, August 18, 2009 column

 

FT Home

UK

 

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


 

Copyright The Financial Times Ltd 2009.

 

 

 

This Forum program is open, free of charge, to anyone concerned with investor interests relating to shareholder advisory voting on executive compensation, referred to by activists as "Say on Pay." As stated in the posted Conditions of Participation, the Forum's purpose is to provide decision-makers with access to information and a free exchange of views on the issues presented in the program's Forum Summary. Each participant is expected to make independent use of information obtained through the Forum, subject to the privacy rights of other participants.  It is a Forum rule that participants will not be identified or quoted without their explicit permission.

The organization of this Forum program was supported by Sibson Consulting to address issues relevant to broad public interests in marketplace practices, rather than investor decisions relating to only a single company. The Forum may therefore invite program support of several companies that can provide both expertise and examples of performance leadership relating to the issues being addressed.

Inquiries about this Forum program and requests to be included in its distribution list may be addressed to sop@shareholderforum.com.

The information provided to Forum participants is intended for their private reference, and permission has not been granted for the republishing of any copyrighted material. The material presented on this web site is the responsibility of Gary Lutin, as chairman of the Shareholder Forum.