Church comes out against the City’s bonus culture
A TOUGH POLICY on bonuses has been adopted by the Church of England on the recommendation of the Ethical Investment Advisory Group EAIG).
The policy calls on church investing bodies to challenge the bonus culture and recommends that executive directors in receipt of competitive salaries should not be awarded bonuses of more than 100 per cent of base salaries for target performance.
“Awards of more than 100 per cent of base salary can only be justified if an executive director has delivered extraordinary results through exceptional performance to the significant benefit of shareholders,” the policy states.
The policy stresses the importance of schemes that prioritise long-term over short-term performance. It recommends that companies have long-term incentive plans for executive directors covering five to seven years that should be paid in shares held for the long-term.
Companies are to be encouraged to reward performance on ethical, social and environmental issues as well as financial issues.
The policy lists as examples ‘ethical business conduct such as tax, bribery and treating customers fairly’, ‘respect for human rights and co-operation with those seeking to create the right conditions for a just society (eg NGOs, government)’ and ‘environmental sustainability (eg green house gas emissions and water efficiency)’.
The policy states that ‘companies should approach remuneration and reward in a holistic way for all staff’ and says that they should disclose how they monitor and mange internal pay differentials and trends.
Church of England bodies, including the Church Commissioners, manage over £8bn in assets, including property and agricultural land.
Edward Mason of EIAG told the Financial Times he expected them to support only about one in three remuneration reports this spring.
More than half of the £3bn the Church Commissioners holding in equities is invested in overseas companies. The Commissioners could therefore be voting against bonus payments in the US as well as in the UK.
Church officials pointed out that the Archbishop of Canterbury receives only three times the stipend paid to a parish priest and expressed the hope that the new policy would help change thinking about bonuses so that in the end the Church would not have to vote against remuneration packages.
The policy concludes: “The system and culture of executive remuneration that has developed over the last 30 years, today faces unprecedented questioning. Turning the tide will take courage and leadership from both the non-executive directors who determine remuneration and the executive directors who receive it. We will work collaboratively and in particular support companies who take risks and model a different way of doing things.”