Member Article

Executive pay increases “unsustainable?, say IoD

The Institute of Directors (IoD) is calling on the government to address the issue of executive remuneration, which they believe is increasing at an “unsustainable” rate.

The Department for Business has carried out a consultation into the rapid increases in executive pay over the last 10-15 years, a practice which Simon Walker, director general of the IoD has noted with great concern.

He commented: “We are aware of the difficult challenges faced by remuneration committees over the last 10-15 years, but the current rate of executive pay is unsustainable.

“The legitimacy of UK business in the eyes of wider society is significantly damaged by pay packages that are not clearly linked to company performance.”

As well as calling for reconsideration of pay packets, the IoD made several other proposals, including the introduction of binding shareholder votes on executive remuneration, as well as employee representatives volunteering to be part of the remuneration setting process.

He also refreshed demands for more diversity in the boardroom, to encourage “objective scepticism.”

Mr Walker continued: “A higher level of professional diversity amongst independent non-executive directors will assist boards in aligning executive pay with society’s expectations.

“Shareholders should also play a more active oversight role.

“Remuneration committees should explore ways of engaging with employees on remuneration policy. This will be important in increasing the legitimacy of executive remuneration in the eyes of wider society.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .