Clawback in executive pay demanded

A study of institutional investors in the UK shows that the vast majority believe that executive pay has become too high.

Research conducted by The Share Centre reveals that 95 per cent of investors questioned share the same view, with 83 per cent in favour of clawback arrangements. Some 56 per cent highlight benchmarking against other companies as the main reason behind inflated pay, particularly regarding using higher paying international markets as a yardstick.

Further findings from the Accountability in Business report show that 12 per cent say that there is still a gap between male and female executive pay. A quarter are now calling for more analysis in the area on the back of too few female executives in today's market.

Research conducted by sister publication Growth Company Investor earlier in the year showed that 2011 represented something of a thaw for many directors. The median salary for a chief executive on the Alternative Investment Market (AIM) passed the £200,000 threshold for the first time and stands at £200,352 compared to £190,300 the previous year, an all-time high. Total board remuneration climbed to £496,500, also an all-time high and a big increase on the figure of £460,670 a year earlier.

However, there is still a substantial minority of AIM CEOs who saw no rise in their basic salary: 23 per cent had it frozen, and for 20 per cent it was cut.

Gavin Oldham, chief executive of The Share Centre, says it is understandable that there is so much concern about executive remuneration in a time of austerity.

He adds, 'While we recognise the need to reflect market comparisons, these need to be much more closely scrutinised, particularly with respect to the performance and risk exposure of top earners.

'Meanwhile, there should be far more sensitivity shown in setting both salaries and bonuses, with the multiple between highest and lowest earner (full-time equivalent basis) being disclosed in companies annual reports.'

In the report, there is a 'very strong view' that companies should consider the impact of employees when setting executive pay, with 88 per cent believing this should be done.