James Moore: Questions to rattle the big-money men – for now

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The Independent Online

Outlook A question for the non-executive directors on Thomas Cook's remuneration committee: was Manny Fontenla-Novoa worth it?

Cook's former chief executive enjoyed all the benefits that the modern CEO has become accustomed to. A seven-figure salary and bonus package (worth £2.3m last year) plus the usual (deliberately) incomprehensible share schemes and long-term incentive plans. He might now be gone but the directors who signed off on his remuneration package remain.

Which brings us neatly to yesterday's report by the High Pay Commission into the soaring salaries enjoyed by the occupants of Britain's boardrooms.

Its recommendations will produce a shiver in the City, whose denizens will scream blue murder at some of its ideas, such as having workers' representatives on boards (even if Europe's biggest and best performing economy, Germany, has had them for years).

Over the next few days we'll probably see business groups responding with the arguments they've tried a million times before. Such as the need to pay to "retain top talent" in a "competitive international market" for wunderkind CEOs. People like Manny, for example. Or Adam Applegarth (who ran Northern Rock) or Sir Fred Goodwin.

One question. When was the last time that, say, a US company (where rewards are really stratospheric and stupid) swooped down for a big UK company boss?

A few do move into private equity, it is true. But not many. Because successfully moving into that field usually requires entrepreneurial nous in addition to managerial skill. The leaders of this country's top companies – with a few exceptions – tend to lack that. They are managers who have climbed the greasy pole rather than risk-taking entrepreneurs.

Institutional investors are well aware of this. But sadly, there are still only a handful willing to kick up a real fuss about the behaviour of remuneration committees at companies whose shares they hold on our behalf. And even those that do don't do it often enough.

Pirc, easily the most vocal governance watchdog, whose exhaustively researched reports are read by a number of large pension funds, is frequently dismissed by City spin doctors as "an outrider" when it criticises their clients and urges investors to kick up a fuss.

That's because in about 99 per cent of cases it is right. Despite this, it remains a voice in the wilderness.

Perhaps, though, institutional investors might care to listen to what it had to say yesterday in response to the Commission: "If we don't make shareholder oversight work in respect of pay, it will inevitably lead to questions about other aspects of governance." Quite.

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