It’s a good outcome. These proposals give shareholders more leverage and that will encourage companies to take note of their views. Nobody wants unseemly public rows every year but, equally, companies need to be clear about the links between pay and performance. The series of negative votes in this year’s AGM season is a sign of pent up frustration on the part of shareholders about a range of performance and pay issues. We need better dialogue and there are signs that is starting to happen. The public concern about pay is understandable. But we mustn’t lose sight of the fact that what really matters is whether companies deliver value to their shareholders. If incentives are cutting across that, or failure is being rewarded, then that is sending the wrong message. Shareholders will continue to keep their eyes on the big picture.
Richard Saunders is chief executive of the Investment Management Association.
Thomas de Freitas
While Vince Cable’s crackdown is in tune with current mood music, giving shareholders ultimate power is a false goal. Europe is facing the economic plight of Japan – two lost decades of stumbling growth. The only way to stimulate prosperity is by incentivising people to lend, invest, create, and innovate. The masses will vote for a quick fix: they can see that cutting executive pay might provide direct redistribution to their own dividends in the short term. But the prudent approach would be to see executive pay as an investment in the right person to steward an economically important enterprise. Then shareholders will benefit from future dividends, employees will gain more stable employment, and babies and pensioners will eat like kings. The current economic climate should be an argument to bolster executive investment, not cut it.
Thomas de Freitas is managing director and director of specialist markets at Communicate Recruitment Solutions.