Fair pay for fair work: a look at executive compensation

Last year we supported the introduction of mandatory executive pay ratio reporting, which is expected to become law soon.

This new report by St Paul’s Institute makes recommendations to build on this improved disclosure to see action regarding the lowest paid, and to see integration of decision making on executive pay and average employee pay rather than the disconnect so evident today.

“Perversely, executives are often rewarded financially for successfully restraining or reducing the wage bill of the company. This needs to be considered in an overall ‘fair pay’ strategy.”

We’re pleased to have supported the new report and its launch at St Paul’s Cathedral on Monday. This forms part of our snappily titled investment engagement theme ‘Addressing inequality through engagement for the fair distribution of company surplus, including fair pay and more transparent executive pay structures’.

Hetan Shah, our Chair of Trustees, introduced the event and gave our endorsement to the report.

It makes five key recommendations for companies:

  • Implement the publication of a pay ratio between the executive and the median staff pay as proposed by the government
  • Simplify pay packages, and rein in stock-based pay
  • Increase the pay of those paid least
  • Publish interior salary multiples, sometimes known as ‘next layer multiples’
  • Build and publish a fair compensation framework

And three recommendations for how investors can support:

  • Create an investor group to influence executive compensation
  • Act on Remuneration Committees
  • Tackle the web of vested interests

The report’s findings were presented to a group of investors and other interested parties, with fascinating and insightful discussion. And we came up with a succinct investor engagement action…

“Dear CEO, would your company adopt a fair pay framework? If not, why not?’

We will be using our investor networks to encourage collective engagement based on these sensible company policy and investor recommendations. Click here to read the full report

“shrinkage in median real income in the UK since the financial crisis has created a class of both the ‘precariat’ with unpredictable incomes and the working poor, reliant on food banks and credit to live, in spite of being in full time work.”

Photography courtesy of St Paul’s Institute

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