Hermes EOS’s Hirt argues if the quantum would be difficult to explain to a person on the street, the board should think about whether it is sensible to put it forward to shareholders and should “use their common sense to adjust pay packages accordingly”.
“I wish there were simple answers here,” Bridgeland says. “Shareholders could do more, but it is directors of companies (speaking as one) who have the responsibility and power to act in their interests. If they are not, then shareholders can (and should) change the board. Shareholders seem reluctant to do this, or are not sufficiently coordinated.
“For large companies the influence of any one shareholder is weak,” she adds. “If they were more coordinated then boards might listen harder or take a more balanced view of their duties and responsibilities.”
That said, the board of any company is ultimately a group of stewards to whom the owners of the company delegate managing that company towards long-term success. Appointing those delegates and holding them to account falls on the owners.
As Goyder says: “The initiative surely lies with the ultimate beneficiaries, which are the asset owners.”
