Plans to allow shareholders to vote on boardroom pay deals have received a thumbs up from the accountancy profession despite fears directors may take fewer risks as a result.
Under proposals announced last week by trade secretary Patricia Hewitt, investors will be given the right to an annual vote on directors’ pay in a bid to strengthen the link between pay and performance.
However, the vote will only be ‘advisory’ – it will only enable shareholders to ‘express a view’.
The move follows increasing shareholder unrest over directors’ remuneration, such as at Vodafone, where shareholders challenged directors on the issue at July’s AGM. Vodafone chief executive Chris Gent is one of the UK’s highest paid executives.
But one senior accountant warned the move could dampen risk-taking by directors. Roger Davis, head of professional affairs at PricewaterhouseCoopers, said: ‘The nature of risk is that sometimes it doesn’t come off. You don’t want to discourage people from taking these jobs.’
But Gerry Acher, senior London partner at KPMG, said: ‘Risk needs to be managed – so long as everyone is clear on their responsibilities this won’t make one iota of difference.’
John Davies, head of company law at ACCA, said: ‘This could make the agm a much more meaningful exercise.’
More at www.dti.gov.uk
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