If the 1980s were the decade of Sid, then the 1990s have proved to be the decade of Cedric. Thatcher-era privatisation awakened this country to the opportunities made possible through share-ownership – but that all too soon gave way to media-fuelled fears that we had replaced greedy unions with greedy bosses. The utility sector, personified by Cedric Brown at British Gas, was the main target of the new politics of envy, but by no means the only one. In July, shortly before issuing a consultative document on directors’ remuneration, Labour’s third trade and industry secretary, Stephen Byers, said: “We need to recognise that in a global economy, world class performance must be rewarded with world class pay. We accept such an approach in relation to sports stars, so why don’t we adopt the same attitude for directors?” What’s important, Byers said, was to establish a link between pay and performance – a link, if you will, between the wealth created for shareholders and the boardroom’s reward for delivering that wealth – and to ensure that a framework is in place “that allows shareholders to exercise their influence effectively on companies’ remuneration policies.” There needs to be, in other words, a means for Cedric to be more accountable to Sid. There are two things that financial directors must do: first, they must take ownership of the pay-performance linkage. After all, there is no one better placed than the FD to advise on corporate performance measurement metrics and how to link them to appropriate reward mechanisms. The second thing they must do is get hold of the DTI consultation document – from http://www.dti.gov.uk/cld/condocs.htm – and then, in conjunction with their chief executives, chairmen and remuneration committees, respond to it by the 29 October deadline (feel free to send us a copy of what you have to say!). New Labour has given the private sector an opportunity to show how it can demonstrate mature and responsible stewardship by creating rigorous, transparent linkages between pay and performance. It is an opportunity too precious to squander.
Karan Lal of REL explores the impact of Brexit on working capital, and how businesses can adapt to a new economic environment in the UK
Anoop Kang will join the specialist child education and behavioural health services provider in July
Ex-Wolseley UK FD joins company behind Very.co.uk and Littlewoods.com
Live webinar to take place on 21 February at 2pm