Shareholders demand more disclosure
Shareholders are finding it increasingly difficult to see a link between directors' pay and performance due to a lack of disclosure, new research has revealed.
Eight out of ten directors continue to receive top-scale bonuses for below average performance, despite widespread criticism of a lack of transparency, according to a study carried out by PricewaterhouseCoopers.
Findings showed that even when companies are underperforming, performance-related targets linked to earnings per share increase at just 2% real growth.
Graham Ward-Thompson, partner in human resources consulting, said: ‘A greater level of clarity is needed to ensure that shareholders understand the criteria by which directors are being judged. Companies must address this issue before they are forced to act by changes in the law.’
Growing discontent among shareholders has prompted the government to propose legislation to increase disclosure. Among the proposals, the government intends to extend requirements to include disclosures on all aspects of directors’ remuneration.
‘Growing shareholder dissatisfaction and the challenge inherent in the government’s proposals mean [remuneration] committees must heed the call for greater clarity, better links between pay and performance and above all accountability if remuneration policies are to be judged effective,’ added Ward-Thompson.
The research comes as news that BT chief executive Sir Peter Bonfield could earn £3m this year angered shareholders, who have been asked to subscribe to a £5.9bn rights issue to help the company reduce its debts.