HR
must become more involved in structuring senior executive reward packages if
employers are to avoid shareholder revolts over pay.
This
is the view of remuneration experts, following last week’s unprecedented
decision by GlaxoSmithKline (GSK) shareholders to vote against the board’s
proposals to improve the contract of its chief executive Jean-Pierre Garnier.
Richard
Cockman, a partner at consultancy Watson Wyatt, said the pay structures of
firms must change so rewards for senior executives broadly reflect
organisations’ overall pay policies and place a greater emphasis on pay for
performance.
"I’ve
spoken to two FTSE 100 companies this week looking to instigate root and branch
reviews of pay, and not just in senior positions.
"The
focus now will be on finding the right balance between pay that attracts the
best talent, without aggravating shareholders and employees. This means putting
executive compensation into a broader HR context than before," he said.
Duncan
Brown, assistant director general at the Chartered Institute of Personnel and
Development, agrees HR should play a greater role.
"In
some cases, HR has been taken out of executive pay decisions and that has led
to it being far removed from the rest of the company. Executives can’t live in
a bubble away from the total overall reward policy," he said.
He
said remuneration committees must work closely with HR and more members of the
profession should look to become non-executive directors.
Elaine
Wood, head of reward at Bradford and Bingley, said the GSK vote, coupled with
new pensions legislation, will prompt changes to HR’s role with pay.
"It
will mean the remuneration committee will be far more demanding of HR. I think
they will want more robust information from HR," she said.
By
Ross Wigham
Fat
cat flashpoints
HSBC
– Controversy over director William Aldinger’s new contract
Tesco
– Concerns that executives can double their salary if they perform well
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Alfred
McAlpine – Anger over two-year rolling contracts for directors
Geest
– Investor concern over deal that pays two years’ salary in the event of a
takeover
