One of Britain’s most prominent ethical investment groups has thrown doubt over the government’s plans for shareholders to have greater say over company pay.
Last month Vince Cable, the business secretary, outlined proposals for shareholders to get a binding vote on board remuneration packages in an effort to appease public concern over executive pay.
Sue Round, the head of investments at Ecclesiastical Investment Management, says the government’s approach could pit shareholders against the companies they invest in.
“I’m not sure that a legislative approach is the right one,” Round says. “I would prefer a model where if a certain percentage of shareholders voted against a proposal then a company would have to enter into a dialogue with them. It’s not the best model if you’re having to wait until a binding vote to register your discontent.”
The policy has already received a lukewarm response from both union leaders and several Conservative backbench politicians. (article continues below)
Announcing his proposals to the House last month Cable said:
“Business and investors recognise that there is a disconnect between top pay and company performance, and that something must be done…It’s not government’s role to micromanage company pay but there are things we can do.”
While Round is supportive of shareholders taking an active role in corporate governance concerns, she remains unconvinced by the government’s proposal.
“There’s a lot of noise about shareholder activism at the moment,” she says. “I do think that the asset management industry itself is just about coming to the idea that they should vote. Getting a consensus [from shareholders] can be difficult though.”