Shareholder spring, but what does it mean for housing?
Bosses at Aviva, Astra Zeneca, Man Group, RBS and Trinity Mirror have all recently experienced the wrath of investors. As the ‘shareholder spring’ gathers pace, more and more shareholders have voted against annual remuneration reports, firmly putting executive remuneration back at the top of the agenda.
Political pressure has been added to the mix, with all three of the main parties indicating that they’d like to see greater transparency and accountability for executive remuneration in all sectors.
This follows a period when executive remuneration in the public sector has also been under the microscope, with the Hutton Review making recommendations on how it should be managed in the future, and continued outcry from the unions on what they perceive as ‘fat cats’ pay.
So what does this all mean for Registered Providers (RPs)? Clearly there are no shareholders to satisfy in the same way as in a FTSE 100 company, or central government control of or guidance on public sector pay. In the new era of regulation the onus therefore has to rest on an RP’s Remuneration Committee.
The trends in national surveys of RP executive pay show that yearly increases are at their lowest levels for a long time, with many organisations implementing pay freezes or cuts. But the need to be able to robustly defend levels of remuneration is only likely to increase, particularly where bonuses or performance related payments have been made.
Some key points to consider are that:
- The Remuneration Committee should be independent, with clearly defined terms of reference
- Each organisation should have a remuneration strategy and policy that is relevant to its own needs
- Decisions on remuneration should be transparent and documented, with evidence provided and a clear link to performance measures
- Comparison of performance with peer RPs should be made to provide context to what has been achieved
- External independent advice should be sought on areas such as market rates, setting up approaches to performance related pay etc.
It’s clear that most external interest groups, including the housing minister, would like to see greater transparency in executive remuneration in the sector. As the regulatory framework develops it’s likely that RPs will have to consider what information they should provide to customers on executive remuneration. Linking it to scrutiny reports on organisation performance may just become a natural step to take and organisations will need to be prepared for the challenges that will provide.
While voting on executive remuneration in the RP sector is unlikely to become a feature, as it is for FTSE companies, increasingly providing justification will.
For advice on executive pay contact Michael at email@example.com; tel: 07545 314 749