Most of us would agree that success should be rewarded. However, in this current economic climate, seemingly spiralling executive pay is something which is guaranteed to set temperatures rising. While the rest of us are busy cutting corners, executive pay has generally kept on increasing – which, in many cases, doesn’t actually reflect the success their particular company is enjoying.
The Prime Minister, David Cameron, recently jumped on the bandwagon, claiming that ‘big rewards’ for corporate failure ‘make people’s blood boil’.
He said to the BBC’s Andrew Marr: “What I think is wrong is pay going up and up when it is not commensurate with the success the companies are having.”
The Government is currently looking to introduce new rules, which will ensure companies provide detailed information on executive pay.
So, have the ‘fat cats’ had their day? Well, there’s nothing wrong with people being paid ‘what they deserve’ but it does seem that there’s now a need for more transparency and control over the process.
Under the new rules, shareholders will be able to legally veto what they think are excessive pay packages, while workers may also be given positions on a company’s remuneration committee. However, do either of these groups really have the market knowledge to know what is actually ‘excessive’ in this climate?
There is clearly a gap between the views of shareholders and workers and those of the board. I can’t think of many workers who would want to be seen to support big pay and bonuses for their bosses which seem so much larger than what they and their colleagues are being paid.
There is surely a need for people who are both independent and have market knowledge to sit on these remuneration committees; individuals who can listen to the views of board members, shareholders and workers alike and provide an unbiased opinion and the benefit of their wide ranging commercial experience. Step forward accountants.
Accountants are ideally placed to fulfil this role. They can offer an unbiased view about what is ‘fair and reasonable’, while also benchmarking the pay and bonus structure against other similar companies.
Today, accountants are increasingly becoming business advisers, providing proactive advice, rather than simply ‘doing the accounts’. In a competitive market, they are having to stand out from the crowd. Being an extra member of a remuneration committee is a way of doing that. Doing so is an excellent way of getting to the heart of a company and sharing good practice.
What do you think? Is this a good way of accountants earning additional fees?
