PracticeConsultingJudging the level of rewards

Judging the level of rewards

It's the silly season once again, and one of the great British Public's favourite bete noirs - directors' pay - is up for an airing.

The regularity with which the issue hits the headlines suggests this is an issue consumers really care about. And the media circus that results is generally critical about the individuals who benefit. But why, exactly?

High earning executives – or fat cats – ought to attract our suspicion, the argument runs. The slightest whiff of large sums of money moving from blue chip to blue chip executive apparently suggests, if not guarantees, that foul play has taken place.

But apart from straightforward envy, haven’t we accepted that some people will earn more than others and some individuals – those who achieve complex mergers or reach remarkable turnovers, grow their companies substantially or bring in strong return on investment – deserve bonuses and pay rises?

The problem is deciding who should be rewarded and by how much. Stephen Byers believes it is the shareholders. So do some 70% of FDs polled in this week’s Accountancy Age Big Question.

And it’s hard to work out what is holding companies back. After all, shareholders are made up not just of wealthy individual investors, but institutional investors and through them, ordinary pension holders – democracy of a sort, surely? The sooner executive pay panels submit to shareholder views, the sooner we can all be convinced that director performance has been opened to wider scrutiny.

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