Exclusive...CBI to support pay clawback

sky news 20.11.11


The CBI will this week throw its weight behind the principle of
'clawing back' the pay of underperforming company bosses amid growing
political pressure for executives to show restraint in a deteriorating
UK economy.
I can reveal that Britain's most influential business
lobbying group will tell the Government that it backs the principle of
clawback, which allows companies to reclaim money paid to executives if
it is subsequently demonstrated to have been undeserved.
John
Cridland, the CBI director-general, told me tonight that the CBI was
still finalising with its members its submission to a review of
executive pay initiated in September by the Department for Business,
Innovation and Skills, the deadline for which is this Friday.
Tomorrow,
Cridland will address renewed concerns over executive pay at the CBI's
annual conference. He said the organisation was focused on improving
transparency in the way executives at public companies are paid because
of the complexity of the way remuneration packages are presented.
And he added that the principle of pay for performance had begun to be overlooked.
"Support
for the principle of pay clawback will certainly be in our submission,
on the basis that we support pay for performance over the medium and
long term. Exactly how we do it will be in our submission," he told me.
The
very fact that the CBI will lend its muscle to the argument in favour
of clawback must heighten considerably the chances of Vince Cable, the
Business Secretary, formally recommending such a move when he draws up
proposals for reforming executive pay in the next few months.
Although
some FTSE companies have already adopted clawback in some form in
recent years, there is considerable anger in the City that while
shareholder returns have been substantially diminished at some large
companies, bosses have seen their total pay soar.
A recent report
by Income Data Services put that increase at 49 per cent at FTSE 100
companies last year, although Cridland pointed out to me that that was a
mean average, and that the median figure was 16 per cent.
There
will undoubtedly be a number of FTSE 350 company chief executives who
will be nervously glancing at their bank accounts on the basis that some
of their contents could be reclaimed. I'm thinking particularly of the
likes of John Pluthero, outgoing boss of Cable & Wireless Worldwide;
Robert Schofield, former boss of Premier Foods, and Simon Fox, head of
HMV. All of them have, for a variety of reasons (and not always because
of their own actions), seen the share prices of the companies they run
(or ran) slump during their time at the helm.
Obliging them to
forfeit some of their hefty bonuses while shareholders suffer the pain
of collapsed share prices and reduced dividends surely makes sense. The
dubiously-conceived mantra 'We're all in this together' should apply to
them too.

Talk's cheap... I'll believe the'll do it when it happens.