IoD calls for action on executive pay

Dated: 25 November 2011

The Institute of Directors has submitted its response to the Department for Business’s consultation on executive remuneration, which closes today. Commenting on the IoD’s submission, Simon Walker, Director General of the IoD, said:

“The IoD has noted, with growing concern, the rapid rise in executive remuneration at the largest listed UK companies over the last 10-15 years. We are aware of the difficult challenges faced by remuneration committees in responding to a global market for executive talent. But the current pace of increase in 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.”

Key proposals made by the IoD in its response include the following:

  • More diversity amongst independent non-executive directors. Boards with members from diverse professional backgrounds are more likely to exhibit “objective scepticism” in respect of remuneration policy than current or former CEOs.
  • Introduction of a binding shareholder vote on executive remuneration policy.
  • Engagement of remuneration committees, on a voluntary basis, with employee representatives as part of the remuneration setting process.
  • Greater transparency regarding the potential conflicts of interest experienced by remuneration consultants.
  • A substantial simplification of executive remuneration packages.

Commenting on these proposals, Simon Walker added:

“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.”

A copy of the IoD’s submission can be found here .

ENDS

Contact Points

Edwin Morgan
Media Relations Manager
Institute of Directors, 116 Pall Mall, London SW1Y 5ED
Tel: +44 (0)20 7451 3392
Mob: +44 (0)7814 386 243
Email: edwin.morgan@iod.com
Website: www.iod.com/policy

Notes to editors

  • The Institute of Directors (IoD) was founded in 1903 and obtained a Royal Charter in 1906. The IoD is a non-party political organisation with approximately 38,000 members in the United Kingdom and overseas. Membership includes directors from right across the business spectrum – from media to manufacturing, e-business to the public and voluntary sectors. Members include CEOs of large corporations as well as entrepreneurial directors of start-up companies.
  • The IoD provides an effective voice to represent the interests of its members to key opinion-formers at the highest levels. These include Government ministers and their shadows, parliamentary committee members, senior civil servants and think-tanks. IoD policies and views are actively promoted to the national, regional and trade media. Follow us on Twitter to get the IoD’s reaction on business and public policy issues.
  • The IoD offers a wide range of business services which include business centre facilities, with ten UK centres (three in London, one each in Reading, Birmingham, Cardiff, Manchester, Nottingham, Norwich, Edinburgh, Glasgow and Belfast) and one in Paris, conferences, networking events, virtual offices, issues-led guides and literature, as well as free access to business information and advisory services. The IoD places great emphasis on director development and has established a certified qualification for directors – Chartered Director – as well as running specific board and director-level training and individual career mentoring programmes.
  • For further information, visit our website: www.iod.com