Reforming UK executive pay is tortuous, but worthwhile

Like electing a boss of Fifa whose surname isn’t Blatter or extracting an apology from Thomas Cook, reforming executive pay in the UK is a tortuous process.

 

Vince Cable, the last Business Secretary, had a decent stab at it, introducing a binding vote on pay policies which yielded initial dividends in recalcitrant boardrooms.

 

The shareholder uprisings of 2012 vindicated Mr Cable’s crusade, yet this year’s annual meeting season suggests that there remains a long journey ahead. 

 

They may not have possessed the drama of three years ago, but pay revolts at BG Group, and RSA suggest many remuneration committee chairs are still prepared to ignore the prevailing mood. That’s why this week’s news that the Investment Association is to embark on a reform-minded campaign aimed at simplifying executive pay structures is so significant, for various reasons.

 

First, the organisation’s scale: it represents £5.3 trillion in assets, a large chunk of which are in the UK. Secondly, its basic point is sound: boards have used a cloak of ever-increasing complexity to disguise or justify inflation-busting pay increases. Some form of standardisation of long-term share awards, with more clarity about potential maximum values at vesting, therefore makes sense – although the principle of compliance or explanation remains sound if properly supervised.

 

Daniel Godfrey, the Investment Association chief executive, is right to push for this debate. When the dust settles on its recommendations, Godfrey’s members will need to show that they are prepared to make compromises on transparency too.

 

Among the bulging ranks of Britain’s home-grown super-rich, Jeremy Coller could claim to be the most successful figure in the financial sector. Some 25 years since establishing his firm to exploit undervalued portfolios of private equity investments, he’s in the process of raising a $5.5bn fund – his largest yet. Opportunities in the post-crisis period, noted for banking retrenchment and diversification of the best-performing alternative investment firms, have played into his hands.

 

He’s now quietly overhauling his board. I understand that Alison Carnwath, the Land Securities chairman, and Jonathan Asquith, whose roles include the deputy chairmanship of 3i, have been appointed directors of Coller’s holding company.

 

If his move has the look of someone who’s preparing to be listed, that’s misleading. The intention, City sources say, is to provide a more conventional governance structure.

 

Notoriously publicity-shy, Coller is not an obvious public company type anyway. Regardless, it will be worth watching his inexorable rise.

 

Some wry humour emerged from the reputational wreckage of last week’s multibillion pound fines for rigging foreign exchange markets.

 

The new motto on trading floors? If it ain’t fixed, don’t broke it.