Big firms face protests over hefty pay packages
Ask a member of the public what they think about executive pay and you are likely to get a barrage of abuse. Institutional investors by contrast are normally pretty relaxed about the big pay packages given to the senior executives in large companies. They accept the argument that you have to pay the best to attract the best. However, there has been a minor revolt in London in recent weeks by the very institutions who normally rubber-stamp big pay packages for executives. Some of Europe's largest companies – Lloyds Group, BP, Xstrata, Reckitt Benckiser and Cobham – have felt the brunt of a new wave of shareholder activism.
There have been large protest votes against the remuneration policies of these companies as institutions have realised that the political environment has changed and there has to be fairness in society. When most companies have imposed wage freezes or are laying off workers, it is unacceptable for bosses to be picking up mega bonuses.
This revolt has caught many executives off guard and a number I spoke to last week seemed to think that their shareholders were overreacting. They are wrong. Companies are not run to enrich the managers, they are run for the benefit of the owners, customers and workforce in general. Pension and investment funds are right to demand that executives do not enrich themselves while asking everyone else to take less. Anybody who cannot see this is out of touch with the modern world.
- The writer is Business Correspondent of The Times of London. The views are his own
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