Sustainability in the corporate environment - what happens when all sects of society work together?
02 December 2016
Over the last six months I've been working with the Purposeful Company Taskforce set up by the Big Innovation Company. This is a group of companies, investors, academics, and advisers who have come together to address the question of how the UK corporate governance and capital markets environment can better encourage focus by companies on long-term sustainable value.
One of the nine workstreams has been on executive pay, where I've been closely involved in developing the policy recommendations. The Steering Committee published its interim report on Friday 25th November, which can be found by clicking here:
I support the Government's policy intent of rebuilding trust, accountability and long-termism in executive pay. The report sets out a thorough examination of the best available evidence; and based on this makes a series of constructive recommendations to help inform companies, investors, and policy makers on how best to meet this policy intent in a way that is likely to be effective. The recommendations made include that:
- Companies should adopt simpler pay structures, with reduced reliance on traditional performance pay and more focus on rapid build up of higher and longer term shareholding
- Companies should be required to publish, and engage with employees on, a fair pay charter setting out their approach to pay fairness across the organisation including trends in CEO versus wider workforce pay over time but including fairness of employee pay such as living wage
- Executive pay disclosure rules should be amended to give a fuller picture of the link between pay and performance, including the impact of changes in value of a CEO's existing shareholdings
- Voting powers for shareholders should be extended, so that companies losing a vote or receiving more than 25% vote against two years in a row should be required to bring back their policy for approval as a special resolution requiring 75% support
While this isn't a PwC report, readers of our work over recent months and years will see that it's broadly aligned with our own position on many issues. We think the report is a serious contribution to an important debate, and shows business engaging constructively with the Government's agenda as they publish their recent Green Paper. From a personal perspective it's also been a lot of fun to work on.
It's important to reinforce the principle that policy should be based on evidence. Whether or not you agree with all of the conclusions, the Purposeful Company report sets out a robust evidence base to inform the debate.