Proxy advisors play a valid, and important, role. But their words shouldn’t be treated as gospel, tablets of stone passed down from the self-appointed prophets of corporate governance.
The grumbling over a pay increase for Pascal Soriot – or more specifically, the possibility of a pay bump should he meet a series of long-term performance incentives – is one such example.
The respected boss’ pay isn’t particularly out of whack with his sector, and lags comparators overseas. Losing Soriot would not be a hammer blow to a company like Astra, but it would be far from ideal: investors would be better served with Soriot well-remunerated and sticking around than positioning themselves for a potential poaching of the man in charge, even if it defies the proxy advisors’ spreadsheets.
Pay is not an easy thing to decide. That’s as true for FTSE 100 bosses as it is for second job, rising stars. But one iron rule is that businesses are better off making their bes talent feel rewarded than they are going the other way.
The Soriot frustration follows a poor call on Abrdn’s new chief financial officer, with one proxy raising the red flag at a pay packet that was equivalent to that earned in his previous role.
Is it likely he’d have jumped to earn less? Theory cannot survive contact with reality when it is this off base.
You want the best, you gotta pay. This is as true for cities as it is businesses.
Yes, the rewards on offer in London for FTSE 100 bosses are substantial, and most at a certain point do not do it for the money.
But incentives do matter, and goodness knows London right now cannot risk an exec exodus to other parts of our increasingly global world.
Shareholders would be better served by world-leading management at world-leading prices, even if it generates a few easy headlines in the “popular” press.
The proxy advisors may have got this one wrong, and ahead of AGM season, they should remember that their power is best used judiciously.