Bosses: million-pound exec pay "hurting image of UK business"

02 March 2015 -

SME leaders across the UK think excessive pay for those at the top is the biggest threat to the reputation of British firms

Jermaine Haughton

Public views of Britain’s leading corporations are severely blighted by the large pay packages awarded to executives, according to a new survey of business leaders. A poll of more than 1,000 SME bosses conducted on behalf of campaign group the High Pay Centre found that 52% of respondents admitted excessive pay deals were the biggest cause of diminished trust between the public and big business. And 48% either agreed, or strongly agreed, that falling trust in business was a critical threat to the success of their own companies. Only 26% felt it was not important.

Underlining the severity of the threat, the reputational risks from excessive pay ranked higher than product mis-selling or negative coverage of business in the media.

High Pay Centre director Deborah Hargreaves said her organisation’s findings demonstrate that “outside the boardrooms of big corporations, ordinary small and medium-sized business owners are as appalled by the culture of top pay as anybody else”. She added: “When big business leaders rake in seven or eight-figure pay packages every year – including massive bonuses regardless of company performance – we are clearly seeing a corporate governance failure, rather than a fair and functional free market. Ordinary workers, customers and wider society, not to mention shareholders, are being ripped off.”

The Centre – established by the High Pay Commission in 2011 to tackle the “corrosive” bonus culture in multinationals and blue-chip firms – said that the disparity between what top executives and average workers earn had been growing for 30 years. According to the new poll, 54% of respondents believe the process of building a successful company should be the top priority for a business executive, compared to 13% who admitted they were mainly motivated by financial reward.

Government assistance has also been sought to redress the balance by forcing listed firms to give shareholders a binding vote on directors’ pay. As of 2013, the law required support from more than 50% of investors to approve bosses’ remuneration plans.

Despite that, big businesses have still found ways of delivering high salaries to their bosses. HSBC – currently engulfed in a tax-evasion scandal – revealed last week that its boss Stuart Gulliver was paid £7.6 million in 2014, while chairman Douglas Flint’s total pay increased to £2.5m. Similarly, Lloyds – saved by the taxpayer during the financial crash – is set to pay its chief executive Antonio Horta-Osorio total annual remuneration of £11m.

For more on how to manage the value of your talent, sign up to this forthcoming CMI seminar.