Andrew Moss is the victim of a systemic City problem. But Pro-Business Against Greed has exposed a horrific trend
The Aviva pay revolt, which has led to the resignation of its chief executive Andrew Moss, is the result of a spontaneous coalition of people with different interests who felt that his overall pay package was totally unrelated to the company’s performance. Shareholder votes of this nature, while not currently binding, are at the very least a source of huge embarrassment to the board, and in particular the chair, of a company. In this case the board decided there must be a response to the vote and action has been taken. Aviva’s performance over the short, medium and long term has been pretty awful, and its board needs to examine its own effectiveness.
As an individual shareholder I voted against the remuneration reports for both Aviva and Trinity Mirror, as did the majority of shareholders. Both chief executives have fallen on their swords. They have gone because of the consensus that their pay and performance were not aligned. My concern, however, is that there is not yet a consensus that the top earners across the City are significantly overpaid.
Most top salaries are determined by a remuneration committee appointed by the board of directors and instructed that the pay and rewards package should be significant enough to attract, retain and motivate individuals. Remuneration committees know that if a chief executive leaves because someone offers him or her more, they may be accused of not doing their job properly, so in practice they err far too much on the side of generosity. Without any downward pressure, these rewards become greater and greater each year, leading to the massive disparities we see today. What needs to happen now is vocal and organised opposition to this pay escalation so that the “rem coms” feel they can risk returning salaries to sane levels.
From my background of running a successful public company for nearly 25 years, I can see the changes and trends over that period. There used to be more private shareholders who took an interest in the business; now there’s much more investment through funds. In my earlier years we used to sit down each year, look at how the business was performing, at inflation, and particularly at what the rest of the staff were getting. We were very conscious that our salaries should not divert much from the rest of the business.
Now, though, senior executives are much more interested in the marketplace, at what other CEOs are getting. If this trend continues, it is horrific to think what society might be like in 10 or 15 years. It could get a lot sicker.
All this has led me to form a loose-knit grouping under the umbrella Pro-business, Against Greed. Our overall objective is to reduce the excessive and growing difference in net pay between the highest paid and the majority. This is intended to help promote a happier, healthier and fairer society as well as being better for pensioners and investors. We wish to see AGM votes on remuneration made binding, so that any agreements with senior executives to vary pay and rewards would be subject to confirmation by shareholders.
We also need to encourage fund managers to regularly vote against high pay generally, not just against the obvious excesses of rewards for failure. This can be difficult because many of them are highly paid themselves, but in Aviva and other recent cases they have taken a responsible line, so this should be encouraged. The organisation Fair Pensions is doing excellent work in this area.
In addition, groups such as the UK Shareholders Association are becoming more and more vocal and influential, and the work being done by the High Pay Centre (formerly the High Pay Commission) is having a tremendous impact.
What happens this year and in the run-up to the AGM season next year is critical, and I believe those of us calling for change will now make a difference. I feel sad that there have to be scapegoats, such as Aviva’s chief executive, for what is a systemic problem in the City. But while I feel sympathetic to the individual, I celebrate the fact that a substantial start has been made.