On 5th February 2019, an event was jointly held by the CIPD and the High Pay Centre, where an expert panel suggested that HR should play a more powerful role on remuneration committees (RemCo).
The event was set up to accompany the recent RemCo Reform report from the CIPD. This report made a case for RemCos to grow into broader people and culture committees, overseeing pay and setting it in the context of genuine performance and business value.
Speakers argued for a greater voice for HR professionals on the committees that set pay strategies, with a view to curbing soaring pay among senior executives.
At the heart of the discussion was the news that the average FTSE 100 CEO is now paid £3.92m a year - a figure which has risen 11% in the past 12 months - and is way above the increase enjoyed by the UK workforce as a whole.
Luke Hildyard - Executive Director of the High Pay Centre - stated that there were far more people from marketing backgrounds than HR professionals serving on remuneration committees.
He added;
“When you think about the insights that people from HR could bring in terms of reward and motivation...that seems to be remiss. The HR perspective is missing in RemCos.”
Shadow Business Secretary - Rebecca Long-Bailey - told delegates;
“Time and again, we hear about record-breaking pay packets for so-called fat cat bosses. We have the slowest wage growth among G20 countries, but that hasn’t been the case for executive pay at the very top and that’s not fair. The prime minister has said it’s not anti-business to suggest big business needs to change on remuneration. For once, I agree with her.”
Iain Wright - Director of Corporate and Regional Engagement at accounting body ICAEW and former Chair of the parliamentary business select committee - said executive pay had become, “.......like a virility symbol, a statement of a company’s ambition”.
He added:
“........how much do we need to be paying to attract the best, while also being mindful of our responsibility to the company, to other staff and to society in general?”
Long-term incentive plans came in for heavy criticism with Sandy Pepper - Professor of Management Practice at the London School of Economics - stating that there was evidence that long-term incentive plans were a major factor in inflating executive pay. He said the cost of a long-term incentive plan was greater than the value placed on it by a senior executive - which was the opposite of what companies were trying to do.
He added:
“They are value destroyers.”
Louise Fisher - Chair of the CIPD and member of its remuneration committee - writes that HR data and insights are key to effective RemCo practice, and that means committees need high quality HR leaders to execute their responsibilities.
