NAPF today commented on plans for a binding vote on executive pay announced today by Business Secretary Vince Cable.
David Paterson, NAPF Head of Corporate Governance, said:
“Shareholders have become increasingly concerned about boardroom pay being ratcheted up in a cloud of complexity. A binding vote could help put the brakes on.
“This is an opportunity for everyone to rethink pay policies and to aim for restraint, simplicity and transparency. The goal must be to better link pay and performance, so that it can be explained and justified.
“A single figure which shows what top executives took home will help shareholders hold boardroom pay up to the light. Part of the problem is that deals have become increasingly complex. A headline number will focus minds and allow for clearer comparisons to be made between companies.
“We are pleased that companies will have to inform shareholders about exit payments, or ‘golden goodbyes’, at an earlier stage. These can yield substantial pay-offs in cash, shares and pension rights. Through the binding vote investors will now get the greater say they have been looking for.
“The reforms should help bring about much-needed cultural change. They present a challenge to companies and investors as there will be a need for better communication by both.”