City heavyweights Neil Woodford and Lord Myners are backing proposals for a radical shake-up of executive pay that aim to curb excessive payouts and hand more power to shareholders.
Control over setting executive salaries and hiring and firing directors would be handed to a shareholder committee, under new measures designed to tackle the yawning pay gap between the boardroom and front-line staff.
The report, drawn up by Conservative MP Chris Philp and the High Pay Centre, calls for greater transparency and swifter action to tackle bumper pay packets. This could be achieved by introducing binding shareholder votes on executive pay and by forcing companies to publish the ratio between chief executive remuneration and the salary of the average worker.
The far-reaching plans come as top-brass salaries continue to rocket, with the average chief executive’s pay hitting £6 million per year - the equivalent to 150 times the average worker’s income.
City grandee Lord Myners said shareholders were struggling to hold companies to account over pay because their ownership was becoming “increasingly fragmented”.
“This is as a result of the institutionalisation of ownership and increased pressure in fund management towards creating portfolios with investments in several hundred different companies.”
The former minister and M&S chairman said the mentality of share investors had switched from that of a car owner to a renter.
“The owner services his car, drives it carefully and relies on it. The renter does none of these things.
“Institutional investors are the equivalent of renters. They are driven by the short term with qualified interest in the long term, largely as a result of client focus on short-term performance versus a diversified index or benchmark.”