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Investors told to query pay

CITY grandee Sir David Walker will this week echo calls from City minister Lord Myners for institutional investors to wrest some vestige of power back from the government and regulators by clamping down on wayward bank remuneration policies.<br /><br />The recommendation is expected to be added to Walker&rsquo;s final report on corporate governance at UK banks and financial institutions, to be published on Thursday.<br /><br />Walker, himself a former chairman of investment bank Morgan Stanley, is understood to be concerned that investors are not pressing the issue of pay at banks.<br /><br />His proposals come after Myners said earlier this month that he expects institutional shareholders&nbsp; to be &ldquo;much more challenging than they have been in the past&rdquo;.<br /><br />&ldquo;Where were the owners when these disastrous decisions at RBS were taken?&rdquo; Myners asked. &ldquo;They were egging on the board&hellip; RBS was not brought to its knees by bad regulation but by bad management and bad governance.&rdquo;<br /><br />The Walker report, an interim version of which was published in July, will also dictate that banks should publish details about the salaries and bonuses of its highest earners (though not the names) to increase transparency in the sector.<br /><br />It will also include guidelines on minimum time commitments from company chairmen and non-executive directors, though Walker&rsquo;s original recommendation for the latter of a minimum of 30-36 days is likely to have been watered down.<br /><br />Prime Minister Gordon Brown said the government was &ldquo;ready to respond swiftly&rdquo; to Walker&rsquo;s recommendations. &ldquo;We will be able, for the first time, to force companies to publish details about the pay of their most senior executives,&rdquo; he said. &ldquo;It will give us the powers to reform the running and the boards of the banks.&rdquo;<br /><strong><br />A&65279;T A GLANCE KEY RECOMMENDATIONS EXPECTED FROM SIR DAVID WALKER <br /></strong>Walker will recommend that institutional shareholders take a more active role in overseeing corporate governance at banks and other financial institutions, especially in regulating the thorny issue of compensation, after a widespread crackdown from the government and regulators.<br /><br />Companies will have to disclose the pay of high-earning executives in bands, indicating the number of executives in each band and the elements of salary, bonus, long-term award and pension contribution. However, Walker will stop short of advising companies to actually name their best-paid executives, an idea first floated by City minister Lord Myners.<br /><br />Walker will recommend that remuneration at financial institutions should be deferred so that high earners and board members will see at least half their variable pay offered in the form of a long-term incentive scheme, while short-term bonuses should be paid over a three year period to mitigate risk-taking.<br /><br />Remuneration committees&rsquo; remits will be extended to oversee pay across entire firms, with a particular emphasis on managing risk.<br /><br />The final report will call for non-executive directors on the boards of major banks to adhere to a minimum time commitment at work each year, though this may be lower than the 30-36 days Walker originally recommended in his interim report. NEDs should also be consulted more extensively on risk strategies, he will say.<br /><br />Chairmen should spend no less than two-thirds of their time at their companies.