Finance directors have reacted strongly against recent announcements of increases in pay packages for top executives while their companies have failed to perform, according to an exclusive survey.
This week’s Accountancy Age/ Reed Accountancy Big Question found that 60% of finance directors questioned thought there were no positive benefits from such awards. Many also welcomed moves by the government and the CBI to help curb such payments, especially large payouts for directors that leave contracts early. Only 22% thought that paying these ‘fat cat’ packages were beneficial to the company while 18% remained neutral.
‘In the current global economic climate and indeed in previous climates I can’t think of a single benefit to be gained by a company from announcing fat cat salaries.’ said one FD. ‘The only positive benefits will be to the people who get them,’ said Sally Flint, finance director at Queen Victoria NHS Trust.
Some are not dead set against such packages, just the nature in which they are offered. ‘I don’t have any issues with directors being paid large packages as long as they are delivering results for the company,’ said one respondent. ‘But I do have concerns about directors receiving increases to their packages while their company is financially suffering.
I don’t believe that changes to director’s packages will occur until shareholder involvement is increased.’
Moves by trade and industry secretary Patricia Hewitt to consider restricting payouts, especially exit payments, are ‘long overdue’ according to one FD. ‘Performance should be reflected in pay but the practice of paying people to go away and keep quiet has got to end,’ they added.
Another thought this could be achieved without legislation, a method currently being explored by the CBI’s boardroom issues group, which would rather see shareholder activism impose restrictions on pay than the government.
‘Increased public awareness may put more pressure on shareholders to resist packages deemed to be excessive,’ said the FD.
Some, however, were more than happy with the potential benefits that such payments offer. ‘It has increased my ambition to get one of those roles,’ said the FD.
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