As I blogged previously, the commentariat was united last week in its certainty that Jeremy Corbyn was talking rubbish when he proposed some pretty tough positions on executive pay.
Amazingly, it turns out the the public favours taking a very tough line on executive pay. 57% support the idea that the Government should try and make companies adopt a 20:1 internal pay ratio, with 30% opposed. This is a policy that has only just been floated, and which is associated with Jeremy Corbyn. As such, I'd say those numbers look pretty good.
Just to be clear here, the public seems to support a ratio that defines the max top to bottom pay range within companies, not just the disclosure of what the existing ratio is. Currently we don't even require the latter, although I'd say it's pretty likely to be mandated by government. The public already holds much more radical views than those that are only just being consulted on.
A max 20:1 ratio is much lower than most publicly-traded UK companies. If investors were in tune with public opinion they should not only seek disclosure of ratios, but vote against companies whose ratio is too high. So far, we have seen more investors move into pro-disclosure positions, but I haven't seen any say they will vote against those whose ratio is too great. But if they vote FOR the remuneration policies of companies with large ratios, they aren't representing the views of beneficiaries, right?
I don't think this is sustainable. Either investors, who only have power because the public appoint them to manage their savings, start taking a much tougher line, or policymakers need to start properly scoping out alternative methods. Personally, I have concluded that we have given shareholder oversight a good try, but it hasn't done anything like enough. But AGM season is ahead, so this is an opportunity to see if sentiment is changing.
To date, there hasn't been a single year n the UK when the number of pay defeats inflicted by investors has hit double figures. So let's see if a real change can be brought about this year - let's aim for defeats in double figures in the FTSE350. That means at least 10 defeats which would be unprecedented but only equates to about 3% of the total, so >95% would still get majority support from investors. This is setting the bar very low, but let's test for a pulse before we finally declare the patient dead.