Curbing executive pay

Many of the reforms to curb excessive executive pay, announced last month by business minister Jo Swinson, were a step in the right direction.

Facilitating the comparison between company performance and executive pay could help bring about an end to the culture of ‘payments for failure’.

However, there are limitations to how effective this legislation can be on its own. The proliferation of short-term shareholdings means that it is increasingly unlikely that shareholders are actually in a position to hold the executive to account.

The other missed opportunity is that this initiative only covers executive pay and does not look at pay structures as a whole. Extreme divergences in pay, an over-reliance on commissions and short term sales targets has, in some organisations had a corrosive impact on ethical behaviour. Forward-thinking businesses are starting to put such structures under review and thinking more widely about pay, performance and the development of a healthy business cuture?

Posted by Sally McGeachie: July 2013