One of the UK's biggest business groups thinks something should be done about executive pay

pulse

May 16, 2017 8:33 AM

The IoD is calling for investors to be given more power to reject corporate pay deals.

WPP CEO Sir Martin Sorrell is the highest paid executive in the FTSE 100.

LONDON — The Institute of Directors (IoD) is calling for investors to be given more control over executive pay.

The BBC reports that the IoD, the UK's longest running group for businessmen, wants the threshold for an investor revolt over pay to be lowered to just 30%.

Public companies must put their proposed executive pay plans to a vote among shareholders. Currently, investors speaking for 51% of shares must reject the proposals to force them to be reconsidered. But the IoD thinks that bar is too high and wants investors to be able to force a re-think if just 30% rebel.

The BBC quotes the IoD's head of corporate governance Oliver Parry as saying: "There is still a pressing need to rebuild public trust in big business, to work in the long-term interests of investors and employees, rather than the short-term interests of managers."

The IoD has long called for tougher action on executive pay, saying in 2015 that excessively large pay packets are " target="_blank"the biggest threat to public trust in business."

However, the call for action is perhaps surprising given that the IoD speaks for 30,000 business men and women across the UK.

Executive pay has long been an issue in the City. Seniors leaders at top listed companies argue that large pay packages are needed to attract world-class talent and reward the stresses of running such large companies. However, many investors feel that pay levels have got out of hand and become divorced from performance.

The BBC quotes Parry as saying: "Now is the time for sensible reforms which increase transparency and draw more engagement from shareholders."

It is currently AGM (annual general meeting) season, where investors meet with management to vote on pay and other issues. Several large companies have faced investor revolts, including AstraZeneca, Pearson, and BP.

Sir Martin Sorrell, the CEO of advertising group WPP, is the highest paid CEO in the FTSE 100, earning £48 million last year. However, that was down 30% on the year prior following investor outcry at the large remuneration package.

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