Lots of stuff in there about investor stewardship and I have the full speech if anyone wants it (email me). Here's what he had to say about exec pay:
1. First, it is striking that there is almost no evidence to support the view that paying senior executives ever higher multiples of average earnings produces superior outcomes,
2. Second, there is no logical economic explanation for the fact that senior executive remuneration has become so detached from the rewards of others – I am aware of no fundamental change in the demand for leadership and execution or the supply of talent,
3. Three, we appear to have allowed senior executive reward to have been driven almost solely by reference to external comparators. This may suit those who benefit and those who own the data but it is culturally dangerous to disregard internal comparators and the case for perceived fairness in promoting the cause of the corporation and the interests of owners,
4. Finally, are we right to believe that giving senior executives an ever increasing proportion of their compensation in equity aligns interest and represents value for money? On the former, put simply, how much is enough to achieve enough alignment? Where is the evidence that confirms recent trends and assumed behavioural benefits? On the latter, surely we have gone beyond the point where for the executive the marginal utility or value of yet another share in the corporation is less than the market value of that share because of the lower value that the executive would place on the last share awarded in what will already be a very poorly diversified portfolio from the executive’s perspective.
Again, to put it simply, are companies awarding compensation which has a cost to the corporation of one dollar but a value for the recipient of much less? Perhaps more use should be made of deeply subordinated or even zero coupon debt?