Is banks sharing buildings the way to save cash as virus deals blow to our notes and coins?

Financial Mail

ONE of Britain’s most powerful investors has told bosses to take the axe to their bloated pay packets first if they intend to cut costs by slashing jobs.

Aviva Investors, which manages £346 billion of investments, has revealed it is urging boards to cut executive pay before making large scale redundancies.

It comes as a survey of asset managers accounting for £6 trillion of investments showed an overwhelming two- thirds backed pay cuts for top brass.

The intervention by Aviva, which holds huge sway in boardrooms, is the first public job cuts warning by a major UK asset manager – and will pile pressure on other big shareholders to rebel against fat-cat pay at struggling firms.

Britain faces a jobs bloodbath as companies are weaned off taxpayer support as the coronavirus outbreak eases.

More than nine million workers are being paid through the furlough scheme, where the Government pays up to 80 per cent of salaries. Some firms have chosen to top up workers’ pay to 100 per cent.

But the scheme will begin to be unwound from August and, with a severe recession looming, many companies are planning significant redundancies.

Airlines and manufacturers have already unveiled thousands of job cuts as they predict a painful few years.

Official figures last week suggested 600,000 jobs had already been lost. And economists are warning that Britain could see a return to the jobs crisis of the 1980s, with unemployment at 10 per cent for the next five years.

Mirza Baig, global head of governance at Aviva Investors, the fund management arm of the financial services giant, told The

Mail on Sunday: ‘Any pain should start at the top. Aviva Investors has been communicating that any pay cuts should affect senior management first, whether that means a cancellation or reduction of bonuses, lower future share awards, or even a temporary suspension of salaries.

‘Those measures should come before any scrutiny or decisions about longer- term, wide- scale redundancies or restructuring.’

FTSE 100 bosses are on average paid more than 110 times their average worker, which Baig said looked ‘increasingly indefensible’. He added: ‘ Although the right number will vary by company and sector, the overall number has to fall.

‘In future, we would not expect chief executives to get bumper pay rises just because they may be proportionately in line with average workforce increases.’

Baig, whose company invests on behalf of giant pension funds, said it was too early for some bosses to be back on full pay after initially taking cuts.

It was reported last week that bosses at the housebuilder Persimmon, fashion label Burberry, water giant Severn Trent, and estate agent Foxtons, were already back on full pay, having sacrificed wages during the height of the pandemic.

Baig said: ‘It is too early to reinstate executive pay given that we are still operating under a cloud of uncertainty at both a society and corporate level.

‘Quickly doing so would raise questions over whether the initial move was a symbolic gesture rather than a genuine effort to share the burden of the challenging economic circumstances faced by suppliers, employees and customers.’

Stephen Beer, chief investment officer at Epworth Investment Management, which invests on behalf of the Methodist Church, said executive pay cuts should run ‘beyond a month, or a quarter’, adding: ‘Otherwise they are just token gestures.’

Beer said: ‘ The pandemic is such a transformative event that it is right that senior executives take pay cuts from high levels where large numbers of jobs are being cut and especially where companies have benefited from Government, and ultimately taxpayer, support.’

Their comments come after a survey by t he data provider Proxy Insight of 87 of Britain’s biggest investors, accounting for £6 trillion of assets, showed that 68.3 per cent backed pay cuts for executives, with only 4.9 per cent arguing against. The remaining 26.8 per cent were ‘unsure’.

Mark Coffelt, of Empiric Advisors, added: ‘If there are massive layoffs then, yes, executives should reduce compensation.’

The estate agent Countrywide faces a shareholder revolt over pay on Friday. Influential advisory firm Glass Lewis has urged investors to vote against Countrywide’s remuneration report because it lowered bonus targets for 2019 when it turned out they would be impossible to hit.

The company’s remuneration committee said the changes were to make the targets more ‘relevant and motivational’.