RegulationCorporate GovernanceDTI targets exec pay bonanza

DTI targets exec pay bonanza

Plans to relate executive pay increases to increases in other parts of a company are quietly slipped through by DTI

Companies could be forced to disclose how executive pay increases relate to
increases in other parts of the company, under plans slipped through quietly by
the Department of Trade and
Industry
.

A consultation on the proposals closed last week, after the idea was
initially shelved last year, but it has attracted little attention.
The
Institute of Directors
told Accountancy Age this week the move
would be unworkable. The reform would almost certainly be welcomed by the public
at large, however, given dissatisfaction with soaring executive pay, even where
companies have failed.

‘There are so many different approaches that it would be almost impossible to
regulate,’ said Patricia Peter, the IOD’s head of corporate governance and
employment.

‘Companies would have to produce huge tables, which would have to be put into
a company report, and probably have no relevance to the people reading it. Also,
there’s very little actual connection between someone working on a checkout and
the pay of a chief executive,’ Peter said.

The ideas were first mooted in the companies bill, but did not appear in the
Companies
Act
. They have only now reappeared.

In the paper, the DTI said that remuneration committees of quoted companies
‘were expected to be sensitive to the wider scene, including pay and employment
conditions elsewhere in the group, when determining directors’ remuneration’.

Shareholders do have the right to request additional information if they are
not satisfied with the information provided, but there are currently no hard and
fast rules.

‘People would probably just end up making bland statements unless you put in
these huge tables. It’s a very difficult area which gets even more complicated
when you’re talking about global companies and the different approaches to
remuneration around the world,’ Peter said.

John Davies, head of business law at
ACCA, said: ‘There’s
nothing to stop any company disclosing this information voluntarily, and
recently there have been a lot of raised eyebrows at executive pay.’

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