Compare pay of chiefs with staff’s, say accountants

Companies should declare publicly what they pay their chief executives as a multiple of average employee earnings as a step to tackle "fat cat" pay, the Association of Chartered Certified Accountants has urged.
Such disclosures would reveal that heads of FTSE 100 companies receive more than 80 times the salary of their workers, said the association. The absence of an
effective restraint mechanism for directors' pay, it said, was eroding trust in capital markets.
In a response to a government consultation on how to prevent excessive payoffs for outgoing executives, the association proposed increased transparency over contract terms, empowering small shareholders and enhancing the ethical awareness of directors themselves.
It said companies should report a standard measure to track the relationship of
board remuneration to employee pay and profitability measures such as return on capital employed. This should be introduced through legislation or code of practice as companies were not likely to volunteer.
Paul Moxey, head of corporate governance at the association, said: "Board members themselves must start displaying more sensitivity to the relative balance of their pay and others in their companies. CEOs in the top 100 companies are typically
paid 80 times as much as the average worker.
"Over the last 30 years, there has been a complete de-linking of the relationship between executive and employee pay."
The comments came as a study by Mercer Human Resource Consulting showed leading executives enjoyed a median 6 per cent increase in base salary. The survey of 36 companies, however, showed wide disparity between executives.
Bonuses for chief execu
tives ranged from 15 to 242 per cent of salary.
The association's submission was among more than 100 sent to the Department of Trade and Industry for its consultation on "rewards for failure". Mr Moxey said the terms of the consultation were too narrow. Excessive rewards for executive failure should be considered as part of the wider subject of remuneration.
The association also proposed ensuring board remuneration committees are
made more representative of society, and that listing, rules for companies b amended to require discl sure of settlements whe they are agreed or when first payment is made.
Directors should also b awarded shares rather tha options. If companies paid options, directors should have to hold them for a qual ifying period if they leave their compay.