The poll found the following:
- 26% of respondents are undecided as to whether or not executive remuneration structures need to be rethought and 14% think not
- Opinion is fairly evenly split about LTIPs with 34% feeling that the model is fit for purpose, 34% considering it not fit for purpose and 32% unsure
- The majority of those surveyed do not agree that a binding shareholder vote on executive remuneration every three years is too infrequent given the fluctuations in company success
- A large number of people feel that executive pay should be tied to the wage of company employees in some way, but it was acknowledged that it would be difficult to find an appropriate correlation.
‘I am surprised that 40% of people are either sitting on the fence or feel that the system is not broken. The drive to align remuneration to shareholder returns and company performance while meeting the expectations of shareholders and voting agencies has resulted in complex structures which do not fully meet anyone’s expectations. Furthermore, there is growing anecdotal evidence that executives do not understand their exotic packages,’ says Simon Osborne, Chief Executive of ICSA: The Governance Institute.
‘Some of the blame for excessive pay must lie with remuneration consultants as benchmarking has pushed up rates. However until the short-term focus of investors is addressed, it is difficult to see how remuneration can fundamentally change. Remuneration committees need to really think about the impact of their decisions in the context of reputational risk. They also need to be bolder in setting structures which are better aligned to performance rather than simply defaulting to those structures that shareholders and voting agencies are comfortable with. Equally shareholders and voting agencies need to be more receptive to structures and performance conditions which better reflect the specific Key Performance Indicators (financial and non-financial) used to measure a particular company’s success.’
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Notes to Editors:
- ICSA: The Governance Institute is the professional body for governance. We have members in all sectors and are required by our Royal Charter to lead ‘effective governance and efficient administration of commerce, industry and public affairs’. With 125 years’ experience, we work with regulators and policy makers to champion high standards of governance and provide qualifications, training and guidance.
- The Core Partnership is a niche market recruitment consultancy working with Company Secretaries and their teams to advise on and resource their specialist interim and permanent manpower needs. With relevant professional backgrounds spanning back to the 1980s, The Core Partnership has a wealth of knowledge of the development and dimensions of the role of the Company Secretary. The team provides market advice on relevant qualifications and experience, conducts salary and benchmarking exercises and works throughout the UK and overseas recruiting at all levels to this specific discipline.