Policy matters; but how much when it comes to directors’ pay?
by Peter Parry, May 2016
Directors’ Pay – What’s to be Done
by John Hunter, May 2016
How pay reporting rules let down investors
The purpose of this study is to lay bare the weaknesses of the whole statutory governance system relating to executive pay. This includes the fact that the overwhelming majority of shareholders who voted on the Taylor Wimpey remuneration report at the last AGM voted in favour of it. The same will be true for most other FTSE100 and FTSE250 companies. Many of these shareholders will be City institutions - the so-called stewards of other people's money. They too are handsomely paid (by way of the fees they charge) to monitor the companies in which they invest other people’s money - including monitoring the remuneration policies of those companies. But the trouble is, they don't. Their attitudes on pay are typically complacent and compromised by self-interest; and sadly, while the dog that ought to bark on the subject of executive pay slumbers, so does the government.
The ideas outlined in this paper are in the process of being developed into a comprehensive policy position for the UK Shareholders’ Association (UKSA) on the contentious subject of boardroom pay. The project is being led by Peter Parry, an UKSA member with over forty-five years’ experience of investing in company shares, with a current portfolio of about 100 holdings. Peter has spent much of his career in management consultancy specialising in purchasing and is still active. Peter says, ‘Over the years I have attended many shareholder meetings and often raised questions about directors’ pay. The responses vary from bland and vague comments about needing to retain high-calibre people, to disdain at the sheer impertinence of daring to ask about an individual director’s pay. In one case, after about ten minutes of pushing for satisfactory answers, they simply lied to me to shut me up! When that happens you know that the company’s shares are better avoided.’
Copyright Peter Parry & UKSA, reproduce with permission only.