06 October 2003
Legislating for directors' pay is unworkable according to CIMA in their response to the Department of Trade and Industry’s consultation on "rewards for failure". It will be yet another cost to business and hence to shareholders and we encourage the Government not to take an interventionist stance” said Charles Tilley, Chief Executive, CIMA.
According to CIMA's response to the consultation, there are three pillars to support that executive pay is managed properly. These are:
Charles Tilley continued:
"This year we have seen shareholder activism step up a gear on the back of more transparency on pay. The result of these interventions has been evidence of the power of market forces to regulate the capital markets. It is also crucial that failure is defined up front by the remuneration committee with carefully designed performance criteria. Criteria should certainly relate to the performance of individual directors and to factors that are in their control. Share price movement, for example, is likely to be affected by a broad range of factors."
He added:
"Context is also important because Chief Executive Officers, in particular, take on high levels of responsibility and stake considerable reputational risk on their organisation's performance, particularly when they have been appointed to rescue as much value as possible from very difficult situations. Carefully designed reward packages can ensure that directors' interests are aligned with shareholders."
View the full CIMA response to the consultation.
If you would like more information please contact Lottie Muir
Phone: +44 (0)20 8849 2407
Email: lottie.muir@cimaglobal.com
Fax: +44 (0)20 8849 2458
