Report on the launch event for the State of Pay Report held on the 17th December 2012
We’ve heard a lot about the need to tackle top pay in the past year and yet has there been much change? Cliff Weight from MM&K thinks not.
Shareholders have been voting to curb large pay-outs although usually where there has been too much discretion over the package and where there is a retention payment. There was still a 92 per cent approval rate for remuneration reports this year.
According to the latest data from MM&K and Manifest, chief executive pay continues to increase sharply with salaries up 3 per cent this year and total remuneration up 20 per cent on average.
Cliff also pointed out that bonus targets had increased so that executives stood to receive a larger percentage of the potential pay-out (60 per cent rather than 50 per cent) for meeting corporate objectives.
He is not in favour of the calls from shareholders (and the High Pay Centre) for simplicity in pay structures but says business is complex and there is a need for different remuneration strategies to deal with it.
Remuneration committees need more brain power and should be more robust in negotiating on pay, according to Cliff. He thinks that the requirement for companies to show a chart of their share price over 10 years plotted against CEO pay (due to be in place by October 2013) will help concentrate minds and give companies a lot of explaining to do.
The seminar discussion focused on what shareholders can do to engage more effectively with companies over pay and the need for remuneration committees to work better.
“There is a lot of dysfunctional behaviour on the part of chairmen of remuneration committees,” said one participant. The call was for company chairmen to be more robust on pay and for shareholders to take a stand.
However, pay consultants also should think responsibly about the advice they are offering and how their comparison data is being used by the remuneration committees.