HR should ensure it has input into organisations’ most senior executive
reward packages, to avoid alienating staff and shareholders, according to the
CIPD.
Under changes to the Companies Act 1985, which come into force this
financial year, quoted companies will have to publish a detailed breakdown of
directors’ pay as part of their annual reports and shareholders will be able to
vote on decisions taken.
Duncan Brown, CIPD assistant general-director, said HR needs to make sure
remuneration committees know about the company’s overall reward strategies and
take these into consideration when deciding on executive pay packages.
"HR expertise is needed to make sure there is a clear policy," he
said. "The committee also needs to know what is expected from the
directors, and HR can establish this."
Rob Burdett, senior consultant with reward specialists New Bridge Street
Consultants, said the new rules will increase pressure on remuneration
committees.
"Committees will have to think hard because they won’t want to see
their recommendations voted down [by shareholders]."
Burdett said pay levels are going up, but are being linked to tougher
performance conditions.
He said while many people question the level of raises, the recession is not
the fault of UK plc and financial results must take this into consideration.
Last week, Cable and Wireless’ new chief, Francesco Caio, was awarded a
reward package that could be worth £6.5m. Shareholders said this was
reasonable.
By Quentin Reade
