There's still work to be done to prioritise customers over shareholders
Headlines at the end of the summer showed that chief executive pay has taken a tumble, with investors claiming victory in their efforts to hold companies to account on their approach to pay. With salaries still dwarfing the pay of the average worker, however, and the High Pay Centre think tank stating that more needs to be done "to give the public confidence that our biggest businesses are working for the good of the economy as a whole rather than the enrichment of a few", it would appear that the work of remuneration committees is far from over.
Our summer 2019 Boardroom Bellwether report shows that remuneration committees are in fact working hard to meet investors' expectations. Over half of respondents (55%) have made changes to a remuneration policy following feedback from investors. Of more interest perhaps is the fact that 43% of companies responding to this survey had not made any changes because none were requested - the highest figure since we began asking this question in winter 2017 when the percentage was 28%. This suggests either that investors now have more pressing concerns or that more companies are proposing policies with which their investors are content.
Bellwether shows that the FTSE 350 has a whole raft of measures in place to impose discipline on executive remuneration. 95% of respondents consider pay structures and incentives across the wider workforce when discussing executive remuneration. Furthermore, 71% take the pay ratio between the chief executive and the average employee into consideration. Consideration is also given to share plans and the gender pay gap. 85% of respondents consider employee share plans across the wider workforce and 68% take the gender pay gap into consideration (up from 37% a year ago).
While the focus on executive pay has been one of the dominant corporate governance issues affecting the UK market in recent years, elsewhere other areas of focus are drawing attention. In the United States, 181 US chief executives have signed a letter calling on corporate leaders to take into account all stakeholders, including employees, customers and the wider society, rather than just shareholders. The Business Roundtable lobbying group, which represents some of the world's most senior business leaders and is chaired by JP Morgan boss Jamie Dimon, is ditching the idea that maximising profits for investors should be the main priority...