All power to the shareholders...

THE Prime Minister’s move to name and shame companies where one-in-five investors rebel against executive pay is one of the most significant steps forward for years in this toxic row. The new ‘register of offenders’ will improve the level of debate and, even more importantly, it will empower shareholders.

Information about executive pay and about shareholder voting is already in the public domain, so technically speaking, nothing new is being revealed.

At the moment, though, pay and voting figures are released by each company to the stock market on an individual basis, spread out over months.

That piecemeal delivery means it has been difficult to glean a full picture of exactly how much of a problem shareholders perceive executive pay to be across the stock market.

This is in no way ‘anti-business’ as some critics have suggested. It is shareholders who own companies and, as owners, they have every right to a say on pay.

That’s not socialism, it’s the quintessence of capitalism – and let’s not forget, these are not wide-eyed Lefties camping outside St Paul’s, or a bunch of Corbynistas, but hard-headed City asset managers who are pretty well rewarded themselves.

Shareholders are under no illusions that running a public company is a tremendously difficult job. It is one that very, very few people are capable of doing. Amongst those who do have the rare skills necessary, an even smaller minority are willing to make the huge personal commitment it entails. So those who do take on the task absolutely should be paid well – extremely well if they succeed.

High pay is a badge of pride when it represents the legitimate fruits of achievement, but if the owners of a company have their doubts, then the management should be forced to respond. Managers, however talented, should be accountable to owners and when they are receiving frequent rebukes, then something has gone badly wrong.

The Mail on Sunday’s investigation into boardroom rewards suggests shareholder discontent may be broader and deeper than previously suspected.

Around a third of the companies whose chief executives rank in the top 25 best-paid in the FTSE would have made it into the list of shame at some point in the past four years. In several cases, they would have been named as repeat offenders. Figures like that suggest excessive pay is not an issue confined to the fringes of corporate life, but a systemic problem. At the moment the discussion about high pay is irrational. It coalesces around a few corporate bosses, whose names – deservedly or not – have become synonymous with excess, whilst others slip beneath the radar. Individuals like Sir Martin Sorrell have become caricatures or bogeymen, even though in his case he can claim his wealth is the entrepreneurial reward for having built his WPP media empire from nothing.

Perhaps it was partly nominative determinism that made people so angry with former Barclays bosses Bob Diamond and Rich Ricci – even their names oozed wealth. Then there are figures like Sir Philip Green, who is undeniably very rich but is an entrepreneur, not a corporate overlord, and is therefore not answerable to public shareholders.

The official protest votes underplay the true level of disillusionment shareholders feel over boardroom largesse. City institutions are reluctant rebels. They are wary of saying anything critical in public, for fear of damaging their own investments and losing money. When they do have a beef over pay, they will usually spend weeks or months trying to fix it quietly behind the scenes. Voting against the remuneration report is very much a last resort and in reality a protest of 10 per cent is significant, let alone double that.

This isn’t about the politics of envy: it’s about transparency and about shareholders reclaiming their power.

These aren’t wide eyed Lefties, they’re hard-headed City asset managers