IN A newly published research document from the Lancaster University Management School, the link between salaries and bonuses paid to company directors and a company’s financial performance in the UK is described as being ‘negligible.’
Salaries of these executives have increased by an average of 82 per cent during the past 11 years although return on capital increased by just 1 per cent!
In November of this year, Prime Minister Theresa May said that it planned to make companies explain as well as justify large salaries for their executives and at one stage, it was suggested that she would also encourage worker participation on company boards although this seems to have been diluted recently.
To some extent, having discovered that UK company directors’ pay can be as much as 50 per cent more than their European counterparts, corporate investors and shareholders are not waiting for the government to act and have already rejected pay rises for executives in Anglo American, BP and Smith & Nephew with more expected in the future.
One well-respected investment manager has criticised the greed of company executives, accusing many of them for helping to cause the financial crisis, but still acting as if they had a divine right to increase their salaries whilst planning to reduce staff or their salaries.