Saturday, 29 October 2011

High pay saboteurs

A hunt saboteur once told me a story a fellow sab had told them about how their approach to a hunt changed over time. When this sab first went out, he looked out for for the mounted field. He soon realised that they essentially just follow the actual business along, so he began to look for where the hounds were. And eventually he realised that, if he wanted to be effective in actually sabbing the hunt, he needed to look for the fox, and respond to that.

Incidentally, the sab also told me that once you got used to looking for the fox it was tempting to point it out to a fellow sab, but this was actually a bad thing to do, because someone from the hunt might see you and that would help them locate the fox. Another step on from this, I guess, is to point in a different direction to the where you know the fox is.

Anyway, recently this hunt sabbing story came back to me when I was thinking about executive pay. It strikes me that we are at the point where a lot of people in the policy world still have their eyes on the equivalent of the wrong bit of the hunt. As I've repeated regularly lately, I think we need to be honest about the limitations of shareholder engagement in respect of executive pay. Plenty of corp gov people are feeling pretty jaded about exec pay, not just the amount of their time it takes up, but also their inability to put much of a dent in the upwards trend. Despite this, it is a common retort from policy types when something like the IDS report comes out that we need more shareholder activism. I don't disagree, but this is only part of the story.

As I have again said quite often recently, remuneration committee reform strikes me as the most fruitful territory, though it needs thinking through. It is not popular, there is a lot of unthinking resistance to the idea of employee representation, for instance. In part I think it's force of habit, as we are essentially trying to teach people look at another part of the hunt, which may well have more importance, and changing our ways of thinking can be tough work.

It is striking too that increasingly people on the Right talk up shareholder activism when discussing executive pay. Probably it results from the same force of habit. But I also wonder if in some cases this is the equivalent of making sure they don't point to the fox. Greater employee influence within a business may have more impact on executive pay than improving disclosure to shareholders and/or retooling their powers. Maybe, therefore, it makes sense to keep talking up the shareholder oversight model, and suggesting further reforms to strengthen it, lest attention wander elsewhere.

Because if people on the Left are starting to think strategically about what is else is to play for when looking at corporate governance reforms to address executive pay, shouldn't we assume the same is true of the Right?

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