Wednesday, October 18, 2017

MPs push for radical new measures on executive pay

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Executive pay for senior retail leaders has come under fresh pressure to be reformed as MPs state there is no longer a link between performance and earnings.

A new report from the Business, Energy and Industrial Strategy Committee (BEIS) has stated that recent scandals such as BHS and Sports Direct have eroded the public‘s trust corporate governance.

In light of this MPs, have called for a raft of fresh measures to rebuild the trust lost by “serious failings in corporate governance”.

“Executive pay has been ratcheted up so high that it is impossible to see a credible link between remuneration and performance,” committee chairman Iain Wright said.

“Pay must be reformed and simplified to incentivise decision-making for the long term success of the business and to pursue wider company objectives than share value.”


READ MORE: Sports Direct shareholder criticises corporate governance investigation


Other recommendations aimed at restoring public faith in business leaders include scrapping long term incentive plans (LTIP).

A witness told the committee that these were so complex that they had been used to distort behavior of executives, making decisions that affect share prices, and that some executives didn‘t even understand their own remuneration.

A spokeperson for the committee added: “The UK corporate governance system is recognised throughout the world as of high quality. However, recent scandals and the issue of executive pay have undermined public trust in corporate culture.

“That, together with rising stakeholder expectations, changing business models and technology, means that corporate governance needs to evolve to provide assurance to investors and wider society.”

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