BLOG: Boardroom Pay - the next major reputational risk issue?

Is executive pay the next boardroom battle?

By Magnus Carter, FCIPR

How refreshing it is to see that Cressida Dick, the new commissioner of the Metropolitan Police, has asked for her annual pay packet to be reduced by £40,000.

She’ll still be earning £230,000 a year, plus benefits, so she’s hardly going to starve. But it’s a significant move, designed perhaps to take the moral high-ground when, inevitably, she has to enforce cuts on the Met’s other senior leaders.

Is there any hope that the new commissioner’s move might catch on in Britain’s boardrooms? It is perhaps significant that Cressida Dick works in public service, where leading by example may still be taken to have some value.

 

 

 

 

 

 

 

 

 

 

So far, despite pressure and criticism from investor groups, shareholders, the unions and the media, the seemingly inexorable rise of complicated bonus schemes continues to fuel enormous, but seemingly perverse financial rewards for those at the top of our PLCs.

As Neil Collins of the Financial Times puts it: “Remuneration reports are a glutinous alphabet soup that mean executives get their bonuses even if the sky falls in.”

Now, at last, MPs on the powerful Commons Business Select Committee have spoken out and recommended this week, the phasing out of what are known as long-term incentive plans.

Perhaps tellingly, BP has now taken account of a potential shareholder revolt, with losses accruing since the Deepwater Horizon disaster. Their board has changed the bonus structure for its CEO Bob Dudley, reducing his overall package by 40% and making him take 50% of any bonus in shares, not cash. For context, he still earns around £9 million a year.

The Institute of Directors, (IoD), has said that British companies are in the "last chance saloon" when it came to executive pay.

It'd be reassuring for many if this would at last bring about a reversal of the timid thinking that has led remuneration committees to keep on endorsing these complicated and grossly inequitable bonus schemes. So far, it’s far from certain that this will happen.

With Theresa May and her cabinet distracted by the all-pervading Brexit discussions, it seems unlikely that the government will find the space to tell companies that reform is required. Without that impetus, it seems unlikely that the turkeys in the boardroom will vote for Christmas.

We, the professional communicators, may need to work a little harder at getting over the message to our bosses, just how badly damaged the reputation of big business is by the ‘fat cat’ headlines. And how much kudos may be available to those at the top, prepared to follow Cressida Dick’s example.

Join Magnus’s workshop on Risk Issues Management and Crisis at CIPR on Thursday 27th April.

Article Author: Magnus Carter, FCIPR

Magnus is one of our crisis communications specialists, handling all aspects of crisis training, planning and exercise management. As Mentor's founding consultant, he has an international reputation for media and crisis communications consultancy. Magnus started his career as a newspaper journalist, later spending 25 years in news and current affairs broadcasting, working with the BBC and commercial companies in both radio and television. He is an associate consultant of Bristol Business School at the University of West of England, where he was a senior lecturer in postgraduate journalism before founding Mentor Consultancy in 1998. Magnus has worked with many corporate and public sector clients to ensure that media encounters become a positive opportunity, even in times of crisis. He is a Fellow of and trainer for the Chartered Institute of Public Relations. Magnus is author of Handling the Media! and several published articles on reputation management.