MPs call for crackdown on ‘excessive’ bonuses after Persimmon pay row and Royal Mail boss’ ‘golden hello’
MPs have called for a crackdown on excessive bonuses in a bid to avoid repeats of “shaming” pay packets, such as the £75m given to former Persimmon boss Jeff Fairburn.
The Business, Energy and Industrial Strategy committee called for companies to introduce an “absolute cap” on remuneration to avoid unpredictable long term incentive awards.
It criticised the “underpowered and passive” Financial Reporting Council and called for its replacement to “get tough” on excessive executive pay.
It cited a number of “shaming” recent pay decisions, including former Persimmon boss Jeff Fairburn’s £75m bonus, former Unilever chief executive Paul Polman’s £10.2m pay packet in 2017 and Royal mail chief executive Rico Back’s £5.8m “golden hello” last year.
All three were met with shareholder revolts but were still paid out by the companies.
The committee called for large listed companies to move pay structures away from “unpredictable and excessive bonuses” and set an absolute cap on total rumuneration.
It also urged for stronger links between executive and employee pay.
Committee chair Rachel Reeves said: “Eye-watering and unjustified CEO pay packages are corrosive of trust in business and threaten to undermine the public’s support for the way our economy operates.
“When the company does well, it is workers and not just the chief executive who should share the profits.”
She also called for companies to appoint at least one employee to its remuneration committee.
The Institute of Directors welcomed the report and said recent pay policies had “eroded public trust” but said rewards must still reflect the challenging nature of the job.
Head of corporate governance Roger Baker said: “There is no doubt that the executive pay policies of some large listed companies have eroded public trust in corporate governance. “We fully agree that there is a need for a rethink on the use of so-called Long Term Incentive Plans, having long argued they can generate volatile and unpredictable rewards for company bosses.”