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Blog : BOARD TALK

No Room For Complacency At The AGM

Posted on December 23, 2016 at 1:30 PM

2016 is drawing to a close - and good riddance, say some of us.


Has anything really changed when it comes to corporate governance n the UK ? Will the pre-occupations of Brexit put everything else on the backburner ? What was that last estimate for Brexit becoming Brexit....10 years?


Moving on. Excessive executive pay is certainly still flavour of the minute, with concerns supported from more and more quarters.When even the remuneration consultants jump in, you know the wind has picked up on governance and pay.


The Financial Times just ran a story headlined UK Chief Executives earn much more than their European peers.


I tweeted this snippet for those who do not have access to the FT.


(source: FT December 21, 2016)



The study by Vlerick Business School’s Executive Remuneration Centre is quoted as saying that paying a UK chief executive more does not guarantee improved results.

 

Xavier Baeten, the centre’s founder, told the FT: “People say ‘if you pay peanuts, you get monkeys’. Our study doesn’t show that you can pay peanuts, but it does show that you won’t get the best chief executives by overpaying them.”


Well, I think we could have guessd that. But people are now willing to say it.


I also had an immediate e-mail response to my tweet from someone who should know. "European pay levels can be just as bad, and the disclosure is often far worse. But the good news is shareholders there may be feeling just as revolutionary. So there is no room at the AGM for complacency."


Also, I heard it on the grapevine.... that remuneration committees are putting in for big rises for their CEOs to counteract the effect of sterling gyrations. Oops, that's naughty - not nice - and it won't wash. So watch out for more scrutiny on pay in 2017, no matter how much boardrooms feel they have more pressing issues to consider.


Lawyers are under fresh scrutiny, which can only be a good thing. They too, make ethical decisions every day.


As do the so-called 'professional services' firms or consultancies, which also produce a regular, time-consuming and well-funded stream of reports - which are then covered in the mainstream media with amazing regularity, even when they are of dubious value. But then those same firms pour a lot of funds into sponsoring worthy events run by mainstream meda - conferences, training clubs, events. So any media coverage of the role of these consultancies for business and government has to be a good thing.


But let's not get carried away on the potential of better governance.


The year is ending on a note that should make everyone sit up and think a bit about governance, ethics, and the consequences of actions.


Mark Lyttleton, a former Equity Portfolio Manager at BlackRock Investment Management (UK) Limited, was yesterday sentenced to 18 months reduced with credit to 12 months on two counts of insider dealing. He will be behind bars this Christmas.


“Insider dealing is not a victimless crime, I regard these offences as pre-meditated and blatantly dishonest” said trial judge HHJ Goymer In sentencing Mr Lyttleton.


It's an interesting phrase (and doubtless it has a legal specificity I am unaware of): "a victimless crime." But is there such a thing in financial services - or any services industry for that matter -I wonder ?


Because people at the top can earn vast amounts of money and move on to enjoy their pension pots, often leaving carnage in their wake, judging by recent years.


The impact of their actions can be immense, on the mere mortals around and below. There are always going to be victims. And while those at the top may not set out to be dishonest, overpaying them is surely no recipe for better judgement.


It is a difficult year in which to summon up a festive spirit - but Happy Christmas, have a good break and thank you for reading.


















Categories: Governance, Pay, Shareholders