Outcry about Exec Pay - but still no viable Solutions

A few recent headlines picked from the acres of print dedicated to the question of how to limit 'excessive' Executive Compensation:

"Shareholder Voices heard loud and clear" (CityAM, 4 April 2016)

"Time for Shareholders to stand up for their Rights" (Times, 30 April 2016)

"Snouts still in the Trough" (Daily Mail, 23 April 2016)

You may agree or disagree with the basic premise of Exec Pay being 'excessive'. I would be in the camp that thinks it is way out of line with what is necessary to 'motivate' CEO's and senior Management to do a good job, and let's not forget that there is the question of the morality of the whole process.

But one aspect receives very little mention: If one agrees with the underlying argument that these - and many other - commentators make with respect to Pay, what measures will be required to bring Exec Compensation back to earth. Just hoping that Company Boards will do a better/different job would just be a triumph of hope over experience to speak with Samuel Johnson.

And this leads to an even more important question that will have to be addressed first: What is the 'appropriate' level of Executive Pay? Just setting a limit with reference to average/medium pay in an organisation will not do the trick.

And hoping that the 'Shareholders' (who really are nothing but Fiduciaries for the real End Investor) will suddenly be able to exert a decisive influence is not going to be successful without clear and firm rules and standards. Ad-hoc decisions on the pay arrangements for thousands of companies that require in turn scrutiny by hundreds if not thousands of fund managers that are under constant pressure to perform and manage their business may lead to some high-profile scalps but not change the basic problem in a sustainable fashion.

Your author does not have the answer to these questions - although you will find some tentative efforts in this blog. But maybe you want to contribute your thoughts in order to start a discussion that ultimately will lead to some practiable solutions to the problem.
(10 May 2016)

0 comments:

Post a comment