Any other business

The battle to tackle excess boardroom pay may already be won

15 August 2020

9:00 AM

15 August 2020

9:00 AM

At a low moment in late March, I suggested that all large companies should consider temporary cuts in executive salaries ‘both as a gesture of immediate solidarity and as a move to avert a longer-term backlash against wealth, privilege and the pillars of capitalism’. Latest research from the Chartered Institute of Personnel and Development and the High Pay Centre reveals that 36 of the FTSE 100 list of top companies followed my advice, most commonly with a 20 per cent salary cut for the chief executive but no reduction to the long-term incentive schemes that make up half of total boardroom pay.

The High Pay Centre, which hates high pay, clearly doesn’t think that’s enough of a sacrifice. But what’s interesting is that the battle to quell blatant excess in executive rewards, a subject on which I’ve been holding forth in these pages since 1993, may already have been won.

A separate analysis by Deloitte says median pay for chief executives of the top 30 UK-listed companies fell by more than 7 per cent last year, to £5.9 million, and that only eight FTSE 100 companies (including British American Tobacco, Morrisons and Tesco) encountered an investor revolt against their remuneration proposals, compared with 23 the previous year. Deloitte also found greater restraint in annual bonus payouts and a shift towards aligning executives’ pension contributions with those of their workforce.

In the CIPD survey, the average of FTSE 100 chief rewards last year was distorted by a one-off £59 million payout to Tim Steiner of Ocado. But the median figure, £3.6 million, was actually at its lowest since 2011, having peaked just below £4 million in 2017. More of a flattening after an unjustified upsurge than a serious downtrend, you might say, but still these numbers speak of new awareness among directors of what the outside world thinks of them. Stephen Cahill of Deloitte was right when he told the FTthat boardroom rewards will be ‘under intense scrutiny to ensure that executives are not insulated from the wider social and economic impacts of Covid’. But meanwhile, the backlash against capitalism I feared in March does not seem to have transpired — because as it turns out, the private sector has been seen to respond resourcefully to the crisis while governments have floundered — and the top-pay pendulum has at last begun to swing back of its own accord.

Standing up for optimism

I don’t have many low moments — and sometimes worry that I sound a touch too mellow. Recent readers’ emails have described this column as ‘benign’ and ‘delightfully old-fashioned’, though one also called me ‘the only sensible City writer around’ and another said I made him ‘laugh out loud in Costa’. All of which is very much my aim — but I can see it opens me to accusations of being insufficiently angry, censorious or willing to face the darkness ahead.

So let me assure you I’m well aware the UK economy is now officially in recession having suffered a steeper fall in the second quarter than any other G7 country; that 730,000 UK jobs have already been destroyed by the pandemic and the lockdown; and that only a third of UK office staff have so far returned to their place of work, compared with 83 per cent in France and 70 per cent in Germany.

And yes, I agree that failures of test-and-trace and PPE procurement, kneejerk quarantine rules driven by focus-group fear rather than science, plus impending back-to-school chaos, together form a shocking record of government incompetence. Combined with a botched Brexit finale, all this will intensify the economic damage. But still I believe in the possibilities of business-led recovery — V-shaped at least in its first surge — and I take heart from two things.

First, we can be proud that British laboratories are leading the world in the search for Covid treatments and are reportedly far better co-ordinated than their US counterparts. Second, I’ve just finished reading this year’s record number of entries, more than 140 of them, for our Economic Innovator of the Year Awards, covering sectors from fertility to funerals and every aspect of human and commercial life between. What they all have in common is optimism — so forgive me if I continue to campaign for that cause.

Vicarious exoticism

Last month I asked whether it was too late to jump on the bandwagon of gold. Its price promptly shot up another 10 per cent to record levels above $2,000 an ounce — and demand looks likely to stay strong given continuing US-China tensions, weakness in the dollar and central bank interventions holding interest rates and bond yields down. I also promised to revert to the offer by our veteran investor Robin Andrews to name some ‘carefully chosen exploration stocks’ with ‘significant upside’ as alternatives to physical gold — so I asked him which ones he’s holding himself, and where.

The answer is the ‘golden triangle’ of British Columbia in Canada, where the companies he favours are Ascot Resources and Skeena Resources, with potential to be producing 500,000 ounces per year between them in a couple of years’ time, and the smaller, riskier Aben Resources. You should of course do your own research into these names — and if you yearn for something even more exotic, and therefore possibly undervalued, Robin also fancies Aim–listed Condor Gold, which expects to produce 100,000 ounces per year from its La India mine in Nicaragua.

I may be the City’s most sensible columnist, but which of my rivals has ever offered you an investment idea in Nicaragua? And let’s face it, vicarious exoticism is what we all need as another random quarantine list closes down our last foreign holiday options.

That’s also the current point of my weekly restaurant tips, which readers seem to like too: I may not buy the gold shares but in my imagination I’m booking a table at Don Cándido’s ritzy steakhouse in downtown Managua, the Nicaraguan capital.

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