Executive pay a solution?
A report published yesterday by the IPPR has stated that CEO pay in the UK rose 33% whilst the rise in company value was only 24% in 2010-11.
The current government is looking at ways to change the law so that shareholders can set executive pay. But is this the best way?
For example in Japan the executive pay is much lower than in the UK as the senior managers pay is directly linked to the pay of more junior staff. This creates a more transparent pay structure and, ultimately, if the CEO wants a higher salary they will have to increase the salary of all their staff.
Is this a way forward or are there other alternatives?
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It's an interesting one John. If you look at what happened to Japan over the last 10 years it's hard to say that their pay and benefits system is something to aspire to.
I personally don't think the solution is difficult as it is used by a number of companies already, but it does require some organisations to perhaps change the emphasis of their pay structure for senior executives more towards performance ie base plus performance related bonus plus LTIP (long term incentive plan). The bonus needs to be directly linked to company performance/profit plus other factors such as HSE, while the LTIP rewards longer term performance.