Leading article: The wrong message on pay

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The Independent Online

The news that the pay of non-executive directors of the FTSE-100 companies rose by an inflation-busting 6.7 per cent over the past year is bound to cause anger. From their commanding positions in the world of financial services, the top NEDs, as they are known, are hardly giving a lead to the rest of us.

It is also galling to learn that businesses such as banks, some of which survive only thanks to the infusion of huge sums of public money, are at the top of the league in rewarding their chairmen. Barclays and Royal Bank of Scotland come first in this remuneration contest, offering their chairmen a staggering £750,000 a year each in "basic" pay. Yet the RBS lost £3.6bn last year.

Where is the remuneration committee, the watchdog charged with monitoring executives' pay rises, in this? The depressing answer is that the fees for chairing that committee jumped by an average of almost 15 per cent.

While the subject of directors' pay generally excites passions, many people will want to know what non-executive directors in particular have done to deserve such generous rises. Their functions are not clear. They are not normally whistleblowers and have not in the past been obliged to commit much time to the companies they supposedly help to direct. Yet their fees continue to rise disproportionately, while salaries elsewher eare frozen or grow only marginally.

One problem is that while review has followed review on directors' pay, the conclusions are never binding. It now also emerges that Goldman Sachs and JPMorgan torpedoed plans raised at a meeting of bank executives to bring down remuneration across the board.

Shareholders, meanwhile, have proven weak in enforcing restraint. They have been fobbed off with claims that increased NED pay will be balanced by an increased commitment from NEDs to their companies in terms of time.

These unconvincing claims need to be examined more rigorously. People are running out of patience with executives' lavish pay rises. If companies don't behave more responsibly, and there is no sign of that right now, the public will demand more active intervention in this field from the Government, and will be right to do so.