Tuesday, 7 February 2017

Is this what asset managers really think about executive pay?

There was a fascinating piece in The Times a couple of days ago about asset managers threatening to get tough on executive pay. You know, the news story that now appears before every AGM season, quite often accompanied by claims this could be the "stormiest" AGM season yet.

Sorry if I sound jaded, but I have heard "crackdowns" on executive pay by shareholders being threatened pretty regularly since about 2002 and the results have been pretty unimpressive. I don't think there has been a single year when less than 98% of All-Share companies have had remuneration arrangements approved.

What struck me about the piece in The Times is that attitudes may not even have changed that much. The whole thrust of the article is that asset managers need to be seen to act because if they don't government will do.

It's a "pre-emptive strike" by asset managers who are "Fearful of a tide of new corporate governance regulation". The asset managers agreed (without consulting any of us) that Government intervention *would* (not could) destroy shareholder value. And one manager states: “The last thing we want is government intervention as it could prevent British companies from attracting global talent.” 

What I don't see anywhere in the piece is the sense that high pay for executives is a problem. Rather, government sticking its nose in is the problem, and therefore asset managers need to work together to create the impression of action in order to forestall any government intervention. 

The cynicism and other worldliness on display here is pretty staggering. These people really don't seem to think there is a problem, and will use the power they derive from our savings to avoid public policy interventions.

I've said it before, but giving the people who are least concerned about the scale of executive pay the primary role in overseeing it is a questionable strategy, to put it mildly. The attitude on display in this article makes this argument far more effectively than I could. And we should say thank you to whoever briefed this line to The Times. I think they are idiotic for saying these things in public, but they have provided us with invaluable insight into how asset managers may really view the issue of executive pay. 

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