Institute Of Directors Warn Executive Pay Rates Are 'Unsustainable'

Institute Of Directors Warn Executive Pay Rates Are 'Unsustainable'

Executive pay rates are "unsustainable" and are damaging business in the eyes of the public, the Institute of Directors (IoD) has warned.

In a hard-hitting statement, IoD director general Simon Walker has called for action to curb pay packages that are not clearly linked to company performance.

The IoD has put forward a series of recommendations to the Department for Business, Innovation and Skills which closed its consultation on executive pay on Friday.

"The IoD has noted, with growing concern, the rapid rise in executive remuneration at the largest listed UK companies over the last 10 to 15 years," Mr Walker said.

"We are aware of the difficult challenges faced by remuneration committees in responding to a global market for executive talent. But the current pace of increase in executive pay is unsustainable.

"The legitimacy of UK business in the eyes of wider society is significantly damaged by pay packages that are not clearly linked to company performance."

Among the IoD's proposals for reform is a call for binding shareholder votes on executive remuneration policy.

It said employee representatives should have a role in the pay-setting process, with a "substantial simplification" of executive remuneration packages.

It also said that drawing independent non-executive directors from more diverse professional backgrounds would lead to greater "objective scepticism" in remuneration policy than boards made up largely of current or former chief executives.

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