Pay is a matter of personal pride

Part of the problems for Sir Peter is the disclosure that his potential pay packet for the year could be around Pounds 2.9m.

In the same week that punters turned BT’s problems into sport, PricewaterhouseCoopers issued a report, ‘Sharing in the Boardroom’, which gloomily told us that ‘a lack of remuneration schemes means shareholders are finding it impossible to establish a clear link between directors’ pay and performance’.

There may well be some truth in the idea that we need to know more about why and how top directors earn their dosh but the idea that new guidelines outlining ‘tougher performance targets’ as suggested by the Association of British Insurers will bring directors to heel over excessive pay is just laughable.

In fact, the ABI guidelines and Sharing in the Boardroom miss the point. We ought to be judging directors on how they increase shareholder value. Instead we seemed to be determined to forget how the business is performing in favour of a minute examination of what’s happened to the pension contribution of the top guy over the last 12 months.

The idea we can somehow democratise the decision over what top directors take out is simply wrong.

They know that they just have to sit tight if a media storm whips up around them. And if the worst happens they just parachute out taking a large pay-off with them.

For them there is no risk, only reward. Top directors won’t be shamed into taking less money just because of another footnote among the hundreds in the annual report details how the bonus schemes are worked out. You don’t get to be – and stay – a top business person by caving into a little adverse publicity tabloid style.

Pay levels are a matter of personal pride and ego not shame.

What we need from directors of publicly quoted companies is proper accountability for their stewardship of the business. And incompetents are removed without rewards.

In other words, the only way to starve a fat cat is to take away its cream.

And let’s face it, that solution isn’t on the cards – and never will be.

  • Peter Williams is a freelance writer and director of Kato Publishing.

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