All about "Ratchet, Ratchet & Bingo’" HIgh Pay Event on Remuneration Consultancy

This looks really interesting but I have a clash on Wednesday

"Event: Is Remuneration Consultancy Really Independent?

Wednesday 24th June
12:30 – 14:00
High Pay Centre, 32-36 Loman Street, London SE1 0EH

Remuneration consultants are at the heart of the executive pay setting process. According to the Financial Times, “One of the root causes of the executive compensation madness is the cottage industry of ‘comp consultants’, also described by Warren Buffet as ‘Ratchet, Ratchet & Bingo’”.

Our new report examines their commercial relationships to the companies they advise and the potential for conflicts of interest in the pay setting process. It looks at the additional services provided by remuneration companies in this context.

Report author Paul Marsland will present on his findings and will be joined by additional panellists to answer questions and discuss the report.

Lunch will be served. This event is free and open to the public, but RSVPs are essential. Please email natalia.raha@highpaycentre.org to reserve your place".

Shareholder Spring: Employee reps to stop crony capitalism

I was astonished to read in today's Evening Standard (of all papers) that its City Editor, James Ashton, supported as the only "surefire way for any board to keep in touch with reality" over executive pay, is to appoint employee representatives to the

board "to keep them honest".

The background to this is the revolts by shareholders (or rather asset managers not by and large the actual share owners) at Company Annual General Meetings (AGM) over excessive and unearned top executive pay. Yesterday the boss of insurance giant Aviva was forced to resign after his pay package was rejected at its AGM. So were the bosses of drugs giant AstraZeneca and Trinty Mirror. Tomorrow apparently the British Gas Centrica CEO is also in big trouble.

At a pension conference recently on executive pay I asked Government Cabinet minster Vince Cable why it was thought a good thing that employee representatives were legally required to make up to 50% of the trustee board of a company pension fund, making decisions that could make or break the organisation, yet there was no requirement to have even one such rep on the same company remuneration committee? He claimed to support the principle of employee reps but that the role of a pension trustee was very different to being on a company remuneration committee (which is completely rubbish not least since many employer reps on pension schemes also sit on you know what committees!)

I must admit to agreeing with James Ashton's conclusion that the employee representation "model has been proved to work elsewhere in Europe. What better way for the chairman to keep in touch with the shopfloor than to have the shopfloor turn up in his boardroom once a month? It could make for some uncomfortable meetings".

Update: I'll post on the campaign by Fair Pensions on how ordinary people can take action against executive High Pay soon.

Remuneration Committee "Racket"

Today I listened to Any Questions on Radio 4. There was a question about the outrageous 49% increase in the pay last year of the average FT100 director (about 10 minutes in).

Lib Dem Coalition minister Jeremy Browne
described the company remuneration committees who "set" the pay of such executives as being "a cartel... a real Racket". Tory MP David Davies also cheerfully admitted that it was all a big fiddle and stitch up. While Labour MP Rachel Reeves pointed out that it was not as if these bosses had added any value to these companies in the last year.

Despite accurately describing such pay arrangements as being akin to organised crime Browne failed to offer any solutions. Davies suggested allowing getting company AGM's to vote on individual executive pay rather than the whole executive package en bloc. This would be useful but is not going to change things.

As the TUC points out here why shouldn't there be elected employee representatives on these remuneration committees who would bring "directors a much-needed sense of reality". This seems to work in many of our European competitors such as Germany? Why in the UK is this seen as being some form of unBritish devil worship? This is the sort of dare I say radical but necessary change that Labour should pursue. It is good that Ed is on board.

Over the years I've banged about the subject here, here, here (last year's increase was 55%!), here ... (and elsewhere). Check out Tom's latest post as well.

By coincidence I have just submitted a branch motion on applying the principles of the "The Spirit Level" to company pay differentials.

Picture: Typical FT100 Remuneration Committee at work. The Chair of the Board is asking the committee if they are going to increase his pay...or sleep with the fishes. Well, something like that.