Pearson and BP face pressure over bosses' pay as EU plans new curbs
Top remuneration in the firing line again with move to limit gulf between boards and staff
James Moore is the Independent's Associate Business Editor and writes the Outlook City comment column from Tuesday to Friday. He also has a keen interest in disability issues and when not attempting to further injure himself playing wheelchair basketball.
associate business editor
Thursday 10 April 2014
The executive pay season has burst into life with the EU proposing tough new rules on bosses' remuneration as the educational publisher Pearson was forced to issue a statement "clarifying" its policy amid mounting pressure from shareholders.
BP could also face disquiet today at its annual meeting over chief executive Bob Dudley's £5.2m pay package, more than treble the £1.6m he received in 2012 despite the legal issues that continue to hang over the company. But on the flipside, Next's boss, Lord Wolfson, said he would hand his £4m bonus to 20,000 staff at the retailer, which has enjoyed an exceptional run.
The EU's plan is similar to reforms introduced in the UK, by Vince Cable's Business Department, which have provided shareholders with a binding vote on pay policy every three years. Such a vote is now set to be made mandatory across Europe. But the EU's financial services chief, Michel Barnier, wants to go further, by forcing companies to say why a ratio for the difference in pay between directors and full-time staff is appropriate.
This was left out of the UK reforms because, in part, of sharp differences between various sectors. The multiple between those at the top of retailers, for example, would be very much higher than those at a technology company or investment bank.
There have also been fears expressed that some companies could cynically outsource the lowest-paid workers as a result of the measure.
Mr Barnier said the rules were aimed at tackling "short-termism" among Europe's more than 10,000 listed companies. The move comes amid mounting anger over soaring bosses' pay at a time of high unemployment and austerity.
He said: "I cannot explain this enormous gap between the level of pay and corporate governance, and it does leave you with a pretty bitter taste in your mouth when you see the excessive levels of pay in some cases."
Alexandra Beides, from the lawyers Linklaters, said of the EU plan: "Currently, EU countries differ dramatically in their approach to a say on pay, so the EU's proposals may create a more level playing field. However, the Commission's proposals also contain some more onerous provisions previously considered in some EU countries but not implemented."
Pearson said it was "clarifying" its pay policy following "further discussions with shareholder representatives" just three weeks after publishing its annual report and two weeks before its annual shareholders meeting.
New rules will limit excess pay and bonus increases as well as golden hellos for new executives.
Yesterday's statement, signed by Sir David Arculus, chairman of the company's remuneration committee, said the committee wants "to define and limit when and how remuneration arrangements outside the normal terms of the policy and remuneration in excess of the normal limits set out in the policy might be applied".
Shareholders did not like plans to give the board discretion to exceed its own pay and bonus policies or award over-generous golden handshakes to new executives.
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