PwC reaction to report by High Pay Commission
The High Pay Commission has made a thoughtful contribution to the debate about executive pay, but the range of factors identified shows that finding solutions will not be easy, according to Jon Terry, remuneration partner at PwC.
The High Pay Commission is an independent inquiry into high pay and boardroom pay across the public and private sectors. Its interim report was published 16 May 2011 [e-reward.co.uk news].
Commenting on its findings, Terry said: “The Commission is surely right to focus on the complexity of executive pay as having undesirable consequences - we have long argued that simplification in this area is required. However, performance-related pay will retain an important role in delivering the Commission's aim of fairness: if executives are not rewarded for the value they deliver, it is hard to see how the goal of fairer pay can be met.”
He added: “The focus on how boards operate, on wider issues such as succession planning, and on shareholder engagement is also generally constructive. However, as highlighted in the Walker review into the banking sector, we arguably have enough governance rules already - the focus now should be on how the various parties act within the framework that exists. Pressure on Remuneration Committees is clearly going to grow, but it needs to be recognised that shareholders, through the vote on the remuneration report, already have the tools at their disposal to rein in executive pay, should they choose to do so.”
Finally, while PwC supports the Commission's desire for greater transparency, Terry warns that the unintended consequences of disclosure need to be considered. “In our view disclosure often contributes to pay inflation rather than acting to restrain it,” he says.
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