PwC report on exec pay

PwC's latest report (PDF) on exec pay paints a grim picture of the current state of play:

Over the last decade, executive pay in the UK has increased significantly. The increase in pay has mainly been in the form of higher annual bonuses and long-term incentive (LTI) awards, which are nearly always performance related. As our previous research has shown, the outcome has left almost everyone dissatisfied:
􀁕􀃊 Generally management feel that incentives have become too complex and prescriptive, and are not aligned to the business strategy or within their control. As a result, they do not believe incentives drive performance or change behaviours and many perceive incentives simply to be a lottery.
􀁕􀃊 Many institutional shareholders believe there is a tenuous link between pay and performance. The shareholder perception is that incentives ratchet up each year in line with annual benchmarking while incentive design and performance measures chop-and-change depending on management’s expectation of them paying out (or not). Underlying these perceptions is a feeling that remuneration committees are not being tough enough and exercise poor discretion that always favours executives.
􀁕􀃊 Remuneration committees are caught in a calibration hell trying to design incentives that are durable and balance the expectations of executives and shareholders.
􀁕􀃊 Few really believe that complex long-term incentives retain executives; they just make it more expensive for a new employer to buy-out the executive with golden hellos and guarantees.
􀁕􀃊 The public, particularly since the banking crisis, see executive pay as nothing other than a gravy train – pay regardless of performance rather than pay for performance.

I think this summary is pretty much on the money. We are in a strange scenario where many people (regardless whether managers or investors) seem to think that the system isn't working, and more of the same won't make any difference, yet there are no significant moves to challenge the fundamentals. Given this background there is the potential for really significant reform which could spill over into other areas. But I think many investors are stuck in a mindset that sees any critique of performance-related rewards as running the risk of letting directors get away with... something. So the opportunity is not being utilised. Yet.