Investors let down on Executive Pay Excess

I guess the 'fiduciaries' who look after the interests of the real owners are sleeping at the watch when it comes to executive compensation. PRO GOVERNANCE suggests for a long time that 'incentive' packages should not be handed out on a discriminatory basis, i.e. only to a few people at the top of the organisation. While basic salary can be set at any level (only AFTER the shareholders have had a say, with decision being binding) all perks (bonus, share options, incentive schemes, pensions, health insurance, perks) should be given to all staff members (relative to the basic compensation).
Incentive Pay may suit a used-car salesman but there is no reason why highly remunerated top executives should be paid twice, once via their salary and the second time for showing up. There is no scientific proof that incentive pay is achieving what it is supposed to do. Since the mid-eighties, when this ideology started to become dogma, the performance of major economies and companies has not markedly improved, if at all. Waiting for politics to take a more harsh regulatory stance may not be in the interests of private shareholders and while the real end investors are not able to organise effectively it is up to the top 20-30 global investment management firms as fiduciaries to take matters in their hands. Collectively they control the majority of public companies with average share holdings that are anywhere between 30 and 50 percent. Even the egregiously misnamed 'Private' Equity should not serve as loophole as the same institutions are also prominent investors in these funds.
(2 September 2015)


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