Shareholders’
opinions of executive remuneration are out of step with reality and may cause
difficulties when government proposals for greater wage transparency are put
into action, warns new research.
The
Share Incentive Scheme Survey, conducted by actuarial and financial consultancy
Bacon & Woodrow, finds that 83 per cent of shareholders expect executive
share option schemes to fall between 101 per cent and 200 per cent of salary.
FTSE
100 companies currently pay an average of 400 per cent of salary, with some
awards reaching 800 per cent – four times the amount deemed acceptable by most
shareholders.
Similar
results are also found for long-term investment plans where there is a 400 per
cent difference between shareholders’ expectations and reality.
Trade
and Industry Secretary Patricia Hewitt recently announced a shareholders’ right
to veto executive pay and remuneration issues – a proposal that Bacon &
Woodrow claims might be unworkable.
Company
partner at Bacon & Woodrow, Elizabeth Hubbock, said, "At present, most
shareholders are calling for a reduction in reward levels, but the disquiet has
strong links to the fact that most investors are ill-informed as to the ways in
which performance is measured.
"The
legislation is likely to throw up some interesting issues regarding the way
performance is rewarded and the levels of pay involved."
In
addition to interest in reward levels and performance measures, the survey
reveals a strong desire among shareholders to be involved in regulating company
executive’s performance conditions.
Shareholders
unanimously wanted to see regular performance reviews, with 86 per cent calling
for them to occur every three years.
