Would giving employees a say on executive pay through worker representation on remuneration committees improve employee engagement and trust in leadership?

Let's think about the system of remuneration committees....in most cases Non-Executive directors are appointed using rigorous processes by reputable headhunters. They are seasoned professionals chosen for their deep understanding of business performance; they receive fees upon which they are not usually dependent for their livelihoods; they are independent; they have access to expert independent advice; they often serve on multiple boards across industries, affording them the ability to make objective comparisons. Most importantly they carry personal, reputational risk and their recommendations are scrutinised by a main board, shareholder groups (such as the ABI) and are made public. This is a highly transparent approach. I would question what makes anyone think that employee representatives will make a difference? How will an employee “control” executive pay and how will the employee succeed where Non-Executives have allegedly  ‘failed’? Why would the workforce suddenly become more "engaged" because of employee representation – and when did the debate shift from out of control pay increases to employee engagement? These are two separate issues and should be dealt with as such.It would be far better to let shareholders decide whether they think they are getting value for money – make the voting binding, allow them to set salary limits pre-appointment, use clawback provisions and generally give the shareholder more clout. Employee representatives aren’t the answer. If shareholders don’t like a CEO’s pay then let them hit the CEO where it really hurts – in the pocket!       

There is a huge song and dance in the media about fat cats and over paid executives. I’m not convinced that this is the biggest challenge we face in re booting the economy or the reason we entered a recession. The economy is much more complex .There are some organisations who cannot demonstrate a correlation between performance and pay. Would having staff on the remuneration committee change that ? Not for a moment.  Most organisations don’t have a massive differential between the pay of directors and the rest of staff and the ones who do are not likely to change because of the addition of some staff members to the pay debate. The proposals have in my view not been thought through. The regulatory framework should be strengthened through the role of good Non-executive directors, I would rather see more rigour about their appointments so that they are a voice for common sense rather than cronies of the Chief Executive. We know that concerted efforts have had to be made to improve the number of women represented on boards and few will argue that there is a deficit of talent.  The real issue here though is leadership. There are many wonderful organisations in this county led by able and fair people who know that what really creates employee engagement and trust in leadership is built on day by day year by year effort. Let’s look to good leadership rather than the sticking plaster of the latest fad.      

At the moment remuneration committees in companies often make executive pay decision without reference to what is going elsewhere in the organisation.  It is my view that remuneration committees should take account of remuneration policies, practices and pay increase budgets for all employees when they make decisions about the pay of executives, and disclose this when they report to shareholders.   We need more executives and board members ‘walking the talk’ of responsible capitalism (to use David Cameron’s words) when it comes to their decisions about pay for performance and pay levels. A single employee on a committee can’t make this happen, and it wouldn’t be enough to build trust and engagement with leadership.