Some commentators say the differentials between top and average pay have been allowed to grow too much in the UK too. Mr Melvin maintains that allowing pay to be driven too high comes back to shareholders failing to hold company management properly to account.I agree entirely. But how many institutions are even considering whether levels of pay are reasonable, rather than whether there is some kind of alignment with shareholder interests and/or notional link with performance? Not many, I would suggest. So why would there be any need for companies to think about differentials? (This doesn't preclude the possibility that some companies might want to consider this issue).
“Shareholders were given formal oversight in the UK some years ago by the addition of a vote on the remuneration report. I guess that has not been used properly, and that’s part of the reason we are where we are.”
Also no-one is really digging into how the shareholder vote on remuneration gets used. As I've argued many times, there are wide variations in investors' use of voting rights even on pay yet there is - currently - no pressure on the worst offenders.
Anyway, also worth a quick skim is Seamus Gillen's piece here.