Exec pay again

OK, my tendency to obsess about one issue kicks in again, but it's worth keeping an eye on the executive pay debate.

There have been a few interesting developments of late. First up, David Cameron repeated his suggestion that it would be good if there were more women on remuneration committees, as it might dent executive pay. This is interesting because I'm not aware of any evidence that this might be the case (though very keen to hear if anyone knows otherwise) so it's an odd idea. It might make you think this may in part an attempt to tick the pro-women box now that Cameron's polling advantage there has disappeared, though it risks pandering to a rather patronising view of what greater board diversity would bring.

Personally I wonder if it is instead/also an attempt to avoid the rather more obvious idea of employees feeding into rem comm decision-making. I bet Tories instinctively HATE that idea, because it would a) acknowledge employees as a group, rather than a number of individuals and b) it would start to legitimise an employee role in governance. One of the great achievements on the New Right was atomisation, so people at work think more in individual terms, and less in a collective sense. I don't mean this in any kind of conspiratorial sense - people on the Right believe this is how people should think - but it's an achievement they don't want to lose. So safer to address rem comm reform it terms of individual progress and meritocratic advance than to have to give ground to notions of social partnership and all that entails.

There is some ground opening up here for Labour as many in the party would be actively enthusiastic about employee involvement in rem comms, so this could become a bit of a wedge issue, at least in my little corner of the world. Although asset managers and the investor representative bodies won't like it, there is definite interest in the idea that is starting to bubble up.

More generally there is also a sense that patience is running out. There are only so many times you can call on the executive class to exercise restraint and they stick two fingers up. There are only so many times you can urge asset managers to take a tougher line and they shrug their shoulder and say there's nothing much they can do about it. Of course we've been through all this before, and nothing has changed, so therefore shouldn't we just expect it to carry on? Well, maybe, but it was a former FTSE chief exec who said in a conversation recently that the position of executives taking ever more out of companies as their reward was analogous to the position of the unions in the 70s. People moaned for a long time about TU power before anything happened, but when change came it was very significant.

I now think that we could see some fairly radical reform in respect of executive pay, whether it happens under the Coalition or the next Labour govt in 2015 ;-) I suspect it will go significantly further than the policy positions adopted by most of the 'professional' governance bodies because most of them are still stuck parroting the disclosure+shareholder empowerment model (which hasn't worked very well). There has been an opportunity since the crisis to think very differently, our sector hasn't really done that. Don't be surprised if what we thought were the ground rules of the exec pay debate get overtaken by events.