End this culture of rewarding failures in the boardroom

Share

There is nothing like a downturn to make shareholders look to the value of the companies they own, and, more particularly, to the remuneration of those who have been managing, or mismanaging, their businesses. Abuses that might have been overlooked during a boom suddenly look a good deal more sour when profits are down, the dividend is cut, jobs are lost and the only people who seem to be unaffected by it all are the chaps (for they are still overwhelmingly middle-aged and male) on the board.

There is nothing like a downturn to make shareholders look to the value of the companies they own, and, more particularly, to the remuneration of those who have been managing, or mismanaging, their businesses. Abuses that might have been overlooked during a boom suddenly look a good deal more sour when profits are down, the dividend is cut, jobs are lost and the only people who seem to be unaffected by it all are the chaps (for they are still overwhelmingly middle-aged and male) on the board.

So it is perhaps not so surprising that shareholders in companies as diverse in size and business as the Pru, GlaxoSmithKline and Wyevale Garden Centres have been asking awkward questions about managerial rewards. Yesterday's discussions at the annual general meetings of Shell and Schroders are the latest examples of this encouraging trend. Mutuals such as Standard Life and even some building societies have also been the subject of scrutiny by the owners of those concerns, the members. The increasingly strict rules about disclosure of executive pay and perks, especially the colossal size of pension funds that now have to be topped up to maintain directors in the manner to which they have grown accustomed, have stung shareholders into action. About time.

The National Association of Pension Funds and the Association of British Insurers (in other words, most of the big institutional investors) seem, at last, to have begun to realise that they do actually own the concerns they are investing in – and that they have a supreme duty to ensure that those they entrust to manage these concerns place the interests of shareholders first. This means an end to the culture of rewarding failure. It also means an end to the threadbare excuses churned out by lacklustre directors in middling British companies about the need to match US levels of remuneration, when most of them would be laughed at on the other side of the Atlantic.

The Department of Trade and Industry promises legislation to make companies more accountable for the rewards given to top managers. Very welcome; but the surest way of derailing the gravy train is eternal vigilance by the owners of these companies.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Guru Careers: Software Developer

£35 - 40k + Benefits: Guru Careers: We are seeking a Software Developer (JavaS...

SThree: Trainee Recruitment Consultant / Resourcer

£18000 - £23000 per annum + Commission: SThree: As a Trainee Recruitment Consu...

Ashdown Group: UI Developer - (UI, HTML, CSS, JavaScript, AngularJS)

£25000 - £40000 per annum: Ashdown Group: UI Developer - (UI, JavaScript, HTML...

Day In a Page

Read Next
The PM proposed 'commonsense restrictions' on migrant benefits  

So who, really, is David Cameron, our re-elected ‘one nation’ Prime Minister?

Andrew Grice
Time travel: Thomas Cook has been trading since 1841  

A horror show from Thomas Cook that tells you all you need to know about ethical consumerism

Janet Street-Porter
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

Laughter, but no tears, as Letterman takes his bow after 33 years

Veteran talkshow host steps down to plaudits from four presidents
Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

Hozier's 'blasphemous' song takes Novello award

Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

Join the tequila gold rush

The spirit has gone from a cheap shot to a multi-billion pound product
12 best statement wallpapers

12 best statement wallpapers

Make an impact and transform a room with a conversation-starting pattern
Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

Paul Scholes column

Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?
Season's finale brings the end of an era for top coaches and players across the continent

The end of an era across the continent

It's time to say farewell to Klopp, Clement, Casillas and Xavi this weekend as they move on to pastures new, reports Pete Jenson
Bin Laden documents released: Papers reveal his obsession with attacking the US and how his failure to keep up with modern jihad led to Isis

'Focus on killing American people'

Released Bin Laden documents reveal obsession with attacking United States
Life hacks: The innovations of volunteers and medical workers are helping Medécins Sans Frontières save people around the world

Medécins Sans Frontières's life hacks

The innovations of volunteers and medical workers around the world are helping the charity save people
Ireland's same-sex marriage vote: As date looms, the Irish ask - how would God vote?

Same-sex marriage

As date looms, the Irish ask - how would God vote?
The underworld is going freelance: Why The Godfather's Mafia model is no longer viable

The Mafia is going freelance

Why the underworld model depicted in The Godfather is no longer viable