Excessive executive pay has rightly been under the spotlight this year, and hot on the heels of the ‘Shareholder Spring’ is Business Secretary Vince Cable’s long-awaited review.

The aim of transparency and approval is laudable, but the whole exercise is misguided.  Who cares what the shareholders think?  What about the real stakeholders?

Shareholders are only interested in profit.  Whether they’re city fund managers or small-holding individuals, generally, people buy shares for one reason only.  To make money.

The city fund managers don’t care about the business so long as the share price is high (as someone posted on Robert Peston’s BBC blog, they mainly “have their greedy eyes on their own excessive salaries and bonuses”).

And whist the Shareholder Spring was a breath of fresh air, Peston has argued that it generated more publicity than actual change.  The problem with small-holders is they’re just that – too small to make a difference.  (According to the Manifest Report the average level of “remuneration dissent” at AGMs last year was just 11.7%).

Either way, the point was made on Radio 4’s Today programme that shareholders didn’t care what execs were paid when the economy – and their dividends – were booming.


So, enough already.  The danger of this review – however well intentioned it may be – is that the two most important stakeholder groups are being ignored.

Firstly, the staff.  Clearly, they have a vested interest in the performance of their employer.  Can it be right for the ‘engine room’ employees to be living on the minimum wage – reliant on tips or overtime, and in daily fear that they’ll lose their jobs – while the CEO lives in detached, chauffeured luxury, on an average annual (FTSE 100 package) of £4.8m (or £21m if you’re Bob Diamond)?

I’m not sure the ‘multiples of the basic salary’ argument stands up, but surely 200 times the average wage of £24k is excessive? And many key workers earn well below £24k.

And what about the customers?  Social Media now allows customers to have a more collective (and connected) voice, but it’s just the tip of the iceberg.  Not enough companies appreciate the value of asking their loyal customers to help shape the future of the business – and for those that do, this should include the big decisions like boardroom pay, as well as NPD.

So long as boardroom pay is linked to the share price, rather than ‘real-world’ measures like customer and employee satisfaction and brand reputation, nothing will ever change.

The movement against boardroom greed is long overdue and very welcome, but will only be fully effective when the most important stakeholders are consulted.