Exec Pay: no point holding 'discussions'

When it is reported that (UK) fund managers 'target bankers' pay' we doubt the effectiveness of this kind of discreet fireside chat (that also creates a conflict of interest as the participants gain access to information that normal shareholders never will see). The article highlights the key problem with corporate governance - in the UK and even more so worldwide. There is plenty of analysis (Reports, Conferences etc) but very little action. And what action there is is missing the target - by a mile! What is the point of having secret 'discussions' with management or the board. Shareholders OWN the companies, these people are their employees and not some feudal lord who graciously agrees to listen to the complaints of his subjects. Most companies are controlled indirectly - via the fiduciaries of the real investors, i.e. fund management companies, private banks, pension funds and insurance companies. It is they who need to be brought under stricter control and be subjected to a code of conduct that leaves no wiggle room. This should not be that difficult as the business is highly concentrated among a list of 40-50 institutions globally who control a large proportion of all listed companies (and also the misnamed 'private' equity industry that is mainly staked by the same pools of money).

Executive Pay: another proposal, another non-starter

The former director-general of Britain's CBI makes a number of proposals in an article in the Financial Times. All these proposals have serious flaws: (1) Publishing a single number for compensation of each board member is nice but pointless - the information is already (too well) known. (2) A budget for top overall executive pay will - even if practicable - achieve nothing. Who sets the budget, what is the right amount of pay for the top manager's group? (3) Bringing in independent outsiders to company boards is another non-starter. Is it not required anyway that the majority of board members is independent? and are board members not in any case required to work in the best interests of the company? So the definition of 'best interest' needs modification. (4) Consulting firms may be a negative factor, but who says that all pay is always bench marked in one direction only? Why not use the lowest comparable pay package as benchmark? after all, good business practice means the minimisation of costs, that should include management pay. Anyone frustrated with the efforts of the 'Great and Good' and self-appointed guardians of shareholder interests should get in touch without delay.