More disclosure is not a miracle cure for spiralling executive pay. Indeed, it may have the opposite effect, say Mercer Human Resource Consulting. Responding to the UK government's consultation on directors' remuneration, Simon Patterson, worldwide partner said: "Evidence suggests that disclosure can actually ratchet-up executive pay deals. The peer comparisons recommended in the Greenbury code have undoubtedly been of most interest to the executives themselves, no doubt fuelling aspirations at the top."
On the Government's proposals for shareholder voting, he added: "New requirements for shareholder voting may help concentrate the minds of remuneration committees, but will have little clout. In practice, such votes will come too late, after terms of executive pay and benefits are already written into employment contracts protected by law. It would be more effective to change the remuneration terms in employment contracts before executives were taken on". He suggested that a solution lay in making remuneration committees more effective by ensuring that the non-executives were suitably trained and independent enough to stand up to the board.
