- Executive Remuneration Working Group claims executive pay “not fit for purpose”
- Group includes Sainsbury’s chairman David Tyler
- Report calls for reform of long-term bonus schemes
A group of high-profile bosses that includes Sainsbury’s chairman David Tyler has claimed executive pay in the UK is “not fit for purpose”.
The Executive Remuneration Working Group said there was “widespread scepticism and loss of public confidence” over executive pay, in a report published in conjunction with the Investment Association.
The Working Group, which also includes Legal & General chief executive Nigel Wilson, is calling for reform of long-term bonus schemes and more transparency.
Group chairman Wilson said: “The current approach to executive pay in UK listed companies is not fit for purpose, and has resulted in a poor alignment of interests between executives, shareholders and the company.
“Greater transparency, clearer alignment of shareholder, company and executive interests, more accountability on the part of remuneration committees and greater engagement with and control by shareholders, working through company boards, are vital to restore confidence in a system widely seen as broken.”
The report also said that executive pay has more than trebled since 1998, despite the FTSE trading at broadly the same levels.
It comes ahead of a consultation to take place in the coming weeks.
Commenting on the report, Pwc head of pay, performance and reward Tom Gosling said: “The working group’s design proposals would significantly increase the freedom for remuneration committees to develop simpler, more transparent pay structures tailored to their specific circumstances.
“There’s still the formidable challenge of getting wide-spread acceptance for the proposals from investors and proxy voting agencies. If this can be done then we could see real benefits from these proposals. If not then they won’t amount to much.”
Earlier this month, Co-op chief executive Richard Pennycook took a significant pay cut, with his total remuneration falling by nearly 60%. His basic pay from July will be cut from £1.25m to £750,000.