Do investors have the power to curb excessive bosses' pay?

Bob Diamond at the offices of Barclays in Canary Wharf, London Some Barclays shareholders were unhappy with Chief Exec Bob Diamond's large pay packet

In spite of widespread public anger about the millions of pounds paid to top bankers and executives of other companies, ministers have chosen not to intervene directly.

Instead they have called on shareholders to take a closer interest in executive pay - and to protest when executive rewards are deemed to be excessive.

Well, that happened at Barclays: a majority of Barclays' mainstream big British shareholders - pension funds and life insurance companies - appear to have voted against the bank's reuneration report, or how it paid its executives last year and what it would plan to pay them in future years.

And the figures indicate that a sizeable minority of these British investors with longer-term horizons may also have voted against the re-election of Alison Carnwarth as a director and chair of the remuneration committee.

And yet Barclays won the votes - because its shareholders come from all over the world, and many of its overseas owners, along with other investors, such as hedge funds, aren't particularly fussed about bankers' pay.

And there's another thing: even if Barclays had lost the vote, it would not have been binding on the bank.

That is why the business secretary, Vince Cable, is consulting on making votes on prospective pay compulsory (though votes on the previous year's pay would still have advisory force only).

But for now, shareholder votes against bosses' pay only have the power to embarrass: history suggests that many executives are happy to grin and bear the criticisms from the owners, while pocketing their millions.

Robert Peston, economics editor Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 1.

    if you dont like the way a business is run you dont have to hold shares
    in it you dont have to work for it you dont have to be a customer of it..
    you dont have to co operate with it...yet!!!

  • rate this

    Comment number 2.

    Of course the bad news is that if 26.9% of Barclays shareholders voted against Barclays' remuneration report then this means 73.1% voted for it.

    We should be told who they are.

  • rate this

    Comment number 3.

    Do investors have power to curb excessive bosses' pay?
    We have witnessed the answer, & that answer is NO.
    There seem two ways to go:
    1. Where pay/bonus is issue, executive must get majority of share votes = let him/her chase shareholders around the world.
    2. Take your money out of the guilty financial firm & do your business elsewhere.
    Personally, I like the first option. Make'em scramble!

  • rate this

    Comment number 4.

    Where bonuses are paid in shares, a suitably powerful and angry activist shareholder, like some of those in the US, could massively short the company's shares on the day before the directors first became able to sell them.

    Then again, if a company's directors actively destroy goodwill by generating headlines about bonuses, won't the shareholders have legal recourse over the destruction of value?

  • rate this

    Comment number 5.

    Shareholders and the public have a choice.

    You can bank with Barclays... you can buy their shares... you can invest your pensioners funds in them... you can indulge in a business quid pro quo... you can reciprocate favours... you can excuse corporate greed.

    Or perhaps you might consider the feelings of the British public. Domestic or not... you would be wise to reflect!

    It's your choice.


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