I recommend five simple reforms (in boardroom pay).
1 Annual, binding shareholder votes on board pay.
2 Pay would be radically simplified, with a single figure used for total compensation.
3 Pay would be linked very closely to shareholder value and would go down as well as up; fixed base pay would be kept to a minimum.
4 We need simple contracts that allow CEOs to be fired for breaching performance targets without a pay-off.
5 Remuneration committees should have to explain to shareholders once a year how they are getting value for money from executives – their incentive should be to try and reduce pay to save shareholders’ money, not the other way around.
Rewards for failure must be rooted out, owners of companies empowered and boards made to represent shareholder interests. It’s radical stuff – but not to be confused with waging war on genuine success.
Allister Heath writing in City AM
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