Executive pay scandals harming UK plc
The massive public scrutiny UK executives now face is 'frightening away' good quality executives from publicly quoted companies, the director general of the CBI has warned.
Link: CBI calls for openess in executive pay deals
Digby Jones said FDs and other executives had voiced their fears as the trade body was preparing a set of best practice guidelines on executive pay.
He said: ‘Company bosses are concerned that life in the company goldfish bowl of UK plc will frighten away talent. Good quality people are going off to private equity and a substantial number are turning away because of the public gaze.’
The CBI chief made his comments while launching a six-point best practice plan to avoid scandals in British business over executive pay.
His views were echoed by Jeremy Rickman, director of headhunter Russell Reynolds’ financial services practice.
‘We are in a risk-averse environment and people are being very careful when they take up a position.’
But Andrew Summerlink, of shareholder pressure group PIRC, said moving into private equity would also put executives under scrutiny and that the UK was not the only place where executive pay was in the media.
But the UK should not follow the US example of offering huge pay deals to attract overseas talent, he warned.
‘There are concerns in the US about the absolute numbers that executivesare getting paid. Termination payments dwarf anything in this country,’ Summerlink said.
He conceded that the level of scrutiny was a problem, but said public interest was justified because of the economic power of listed companies.
Summerlink added that the issue was a matter business and shareholders had to sort out. ‘Companies need to show they can deal with these issues or there will be a case for legislation.’
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The CBI guidelines on executive pay proposed one year rolling contracts,part-payment in shares and regular contractual reviews for executives.
The guidelines are aimed at curbing rewards for failure and rebuilding the reputation of UK plc. Digby Jones said that researchers had found FDs inparticular ‘conservative’ and that they wanted fewer shares and more cashinvolved in executive pay deals.