Tackling extremism on remuneration committees

There's a policy idea that unions have floated a few times in the past and that has come up once or twice in the financial crisis (Paul Myners touched on in it one speech) that I've always liked - putting some sort of employee representation on remuneration committees.

These committees, according to the Combined Code, are supposed to be sensitive to pay and conditions across the company when setting pay, yet many still manage to keep deciding that The Only Way Is Up for directors, even when cutting staff. The idea of having an employee rep on there would be to bring a bit of balance to discussions. Naturally enough, it is the sort of idea that most governance people in the UK would laugh at.

But there might be some evidence that actually it isn't a bad idea. Cass Sunstein's new book Going to Extremes is all about how people's views become more extreme if they are in groups of like-minded people. Groups of Democrats become more liberal when they talk together, Republicans become more conservative. The decisions these groups reach are more extreme than the views of the individuals that make them up had previously. The book details the real world effects of the this - juries reaching very different decisions depending on who is on them etc.

Sunstein says that this has obvious implications for business - particularly where board members reinforce each others' risk-taking mentality. And it does suggest that the notion of having independent non-execs on the board to provide challenge is therefore well-grounded.

But it also made me think of remuneration committees. Although these obviously have independent representation on them as best practice, what would seem to matter more is the committee members' attitudes to remuneration practices. Even if they are notionally independent, if they all share the view that you need to pay serious wedge and not quibble over large demands then surely they are likely to reach 'extreme' decisions on pay? (I mentioned this to a colleague at work and he immediately came up with the Dick Grasso case - the members of the compensation committee all being senior Wall Street figures).

So if we accept this basic line of argument, wouldn't it make sense to get someone from the shopfloor, even a TU rep, at least feeding into the remuneration committee, in order to try and disrupt the potential tendency to reach extreme decisions? (And thinking much further ahead, it would be interesting to research NEDs' views on remuneration, and see what the outcomes have been at rem comms where they sit with others with like minds).