As the global economy progresses toward its recovery, the debate on executive pay and bonuses remains a burning issue. While most stakeholders recognise that reasonable bonuses are an important part of remuneration policies, there is also a movement to ensure that the financial system is rebuilt on sustainable foundations, for instance by linking remuneration to ESG performance.
This theme is a good example of multi-stakeholder action on a sustainability issue. Faced with the unfairness of some excessive and unjustified bonuses, each group of society has adopted its own approach.
Firstly, governments, as the key and most visible players, are taking action through reforms and tax systems.
Secondly, consumers have launched grassroots campaigns to support banks with sustainable practices, such as the “Move Your Money” campaign in the US. The initiative encourages consumers to close their accounts with unethical financial institutions, and transfer them to banks with responsible bonus policies. Lord Myners, the UK Financial Services Secretary to the Treasury, also warned the City about mass consumer boycotts if they didn’t reject excessive bonuses.
Thirdly, investors faced with evidence that disproportionate bonuses are harmful to sustainable growth and stability, have started engaging with companies by voting on remuneration packages. The example of Aviva in this section shows that shareholder activism is no longer limited to SRI funds. It has now become mainstream and is a driving force behind long-term investment.
A few symbolic actions by leading players – mainly top executives waiving or donating their bonuses – have shown that these expectations are starting to be recognised. This type of reaction has received widespread media coverage. Despite this, stakeholder actions have yet to achieve their objective: a systemic reform to incentivise sustainable growth and adopt a fairer remuneration practices for the banks’ whole workforce.
This highlights a great opportunity for concerted initiatives, which coordinate actions from all stakeholders to engage positively with companies’ top management. Higher levels of collaboration will certainly be necessary to take this debate to a new level, allowing stakeholders to play a leading role in the reconstruction of our global financial system.
Myriam is a consultant at Corporate Citizenship. Email her at Myriam.galopin@corporate-citizenship.com to discuss campaigns, responsible sourcing and community investment.
European companies fail to link executive pay to ESG performance
EIRIS (Experts in Responsible Investment Solutions) has partnered with Eurosif (European Sustainable Investment Forum) to publish new research highlighting critical challenges and opportunities for companies and investors in relation to remuneration, incentives and long-term sustainability. The research indicates only 29% of FTSE Eurofirst300 listed companies have some commitment to linking remuneration to performance on environmental, social and governance (ESG) issues. The research suggests shareholders should engage with companies by voting against unacceptable remuneration packages and taking part in shareholder dialogue in determining remuneration policy. Contact: EIRIS www.eiris.org
New ‘fit note’ could lead to more workplace disputes
Adams & Remers solicitors has warned that a new ‘fit note’, due to be introduced in April following Government consultation, is likely to cause greater uncertainty for employers and employees, and may result in more disputes in the workplace. The fit note will replace the traditional sick note and includes a ‘you may be fit to work taking account of the following advice’ option, allowing GP’s to suggest changes that might enable the employee to return to work, including amended duties, altered hours and workplace adaptations. The new fit note system aims to reduce the number of working days lost to sickness, which currently stands at 172 million per year. Contact: Adams & Remers Solicitors www.adams-remers.co.uk
Aviva tells chairmen to justify executive pay
Aviva Investors, the fund managers that own about 1.5% of every company quoted on the FTSE, on 1 March wrote to the chairmen of every large listed company in Britain warning them to justify executive pay packets this year or risk a ‘no’ vote at their annual meetings. Anita Skipper, Aviva’s corporate governance director, stated that chairmen needed to demonstrate that executive pay policy was independent, took account of conditions for the rest of the workforce and did not encourage directors to adopt risky practices. Contact: Aviva www.aviva.com
Employers commit to calorie labelling in staff canteens
Consumer goods giant Unilever and food company Nestle were among 21 big names that took part in a Food Standard Agency pilot last year to bring in food labelling in staff restaurants.
It proved so popular with staff that on 2 March 2010 the companies are now planning to make the detailed menus a permanent feature. Unilever’s HR director confirmed plans to roll out nutritional food labelling in all of its canteens by the end of the year. Contact: Unilever www.unilever.co.uk
Boardroom inequality needs tackling
Companies may be required to report on their progress to get more women into the boardroom, under proposals announced on March 8 by the UK government. It comes as new research shows that 60% of people think there are not enough women directors in big businesses. The survey which has been commissioned by the Government Equalities Office for International Women’s Day shows that half believe there will be equal numbers of men and women directors within the next 20 years. However, the reality is that it will take 60 years for women to gain equal representation on the boards of the top 100 companies at the current rate of progress. The Government asked the Financial Reporting Council to consider including a new principle in its code of conduct (UK Corporate Governance Code) to require firms to report on what they are doing to increase the number of women in senior management positions. Contact: News Distribution Service nds.coi.gov.uk
Unite and ASDA initiative to improve working conditions for thousands
On 4 March, Unite and ASDA launched a joint initiative to end discrimination and unfair treatment across the supermarket’s 29 meat and poultry suppliers, employing 6,000 workers. Unite and ASDA have met with all of the supermarket’s 29 suppliers, which range from major multi-nationals to local suppliers. The aim has been to move to a new business model of supply chain management. Central to the joint initiative by Unite and ASDA is agency workers and the directly-employed being paid the same rate of pay. In addition, in their dialogue with the 29 suppliers, Unite and ASDA have identified unacceptable practices which ASDA has acted to bring to an end. Contact: Unite http://www.unitetheunion.com
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