Are remuneration consultants independent?
Companies are required to disclose details of the work done for remuneration committees by consultants and the fees paid for it. This report highlights the poor disclosure of fees for those services. It is impossible to judge whether there are conflicts of interest without better information.
Companies have now had time to get used to the new reporting regulations introduced in November 2013 which require details of remuneration consultancy arrangements to be included in an annual report.
A new study by the High Pay Centre reveals flaws in the reporting of the relationship between remuneration consultants and companies. Almost all companies use a remuneration consultant from a firm that they pay to provide other services. Despite this obvious potential for conflict of interest the fees paid for other services are absent from disclosures.
This flaw in disclosure prevents a proper assessment by shareholders of the independence of the remuneration advice provided.
The study also reveals that despite new legislation some companies are still failing to identify all the firms providing services to remuneration committees and in some cases failing to disclose the fees paid for these services.
The study also confirms that auditors now dominate the market for advising directors about pay. More than half of the companies in the study used an audit firm to provide remuneration services.
Since 1 January 2018 the average FTSE 100 CEO has earned:
Income inequality in the UK
Wealth inequality in the UK
- Are Chief Executives overpaid? Blog by HPC founder Deborah Hargreaves
Author of new book on top pay calls for a new corporate ethos - contact HPC to attend the launch on 11 October
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- HPC response to consultation on the Wates Principles for the governance of privately-owned companies
Large private companies should be subject to the same high standards of stakeholder engagement as publicly-listed counterparts