In recent years, fat cat salaries have come under consumer as well as government scrutiny, which have prompted serious controversy. Not only is the UK under fire for the way in which top execs are remunerated, even when companies have suffered serious losses, but the United States and other leading nations have also been party to these practices.
Vince Cable, the Business Secretary, is expected to begin consulting on his plans which would give shareholders a vote on whether or not execs deserve such high salaries. Critics claim that this would lead to the ability of shareholders to micromanage companies and they further believe that they may not be able to do anything more than ‘second-guess’ the decisions which are made at an executive level.
One critic of this measure is John Cridland the director general of the Confederation of British Industry, CBI. Cridland believes that this is not the right path to take when trying to ensure that the pay of executives actually reflects job performance. As well, shareholders cannot be expected to be effective managers in the day to day operations of a business and this is exactly what would happen if they were placed in a position of micro-managing.
The major focus of Mr. Cable’s plan is to do something about the excessive pay that is being awarded to executives and for him, transparency is key to dealing with the problem. As well, he wants to see more women on the boards looking into these issues as well as encouraging staff to get involved with challenging excessive pay policies. These changes in government regulations will most likely be a long time in coming but raising awareness is a major development and vital step in the process.