View from City Road: Laudable aims may not be enough

Click to follow
Don't blame me, blame the remuneration committee, is the standard defence of a chief executive when asked to justify his mega-salary or vastly inflated pay rise - it produced the rules for judging my performance. Unfortunately, no one judges the performance of the remuneration committee.

Yesterday's guidance notes from the Association of British Insurers, which represents most of Britain's largest shareholders, is a valiant attempt to fill that gap.

It says that long-term bonuses should really reflect long-term performance, not short-term manipulation, that share options should be granted over a number of years, not in one lump, and that directors should be encouraged to hold on to these shares rather than cashing in straight away. Above all, it recommends that the performance criteria on which salaries and options are based should be clearly set out in annual reports.

Laudable aims. As always, persuading companies to comply is another matter. The ABI suggests that shareholders should ask for 'comment or explanation' if the remuneration committee is failing to do its job properly. That hardly looks like much of a deterrent.

Comments