Corporate Governance and the Problem of Executive Compensation: The International Response to the Compensation Problem (Public Pressure for Reform)

The Report of the High Pay Commission put on the table some relatively radical possibilities, including the involvement of employees in the compensation process.  Likewise, the Commission injected into the debate general notions of fairness.  The government, however, sat on the recommendations and, for much of 2012, took no action.

The government's discretion was reduced, however, by the constant attention given to compensation issues in the press.  A much chronicled shareholder revolt took place over the compensation pay to the CEO of Barclays.  Another occurred at WPP PLC when shareholders voted down the pay package.  Political pressure, therefore, continued to build. 

The issue, therefore, put pressure on politicians.  As the WSJ described: 

Executive pay has become a hot-button political issue, with the coalition government having come under criticism from opposition politicians and others for failing to counteract sharp rises in executive pay despite management shortcomings during the recent financial crisis. High pay packets for top managers also have drawn public criticism as the U.K. economy continues to contract, putting thousands more out of work and leaving households with shrinking disposable incomes.

The government, therefore, felt the need to act.  It did so in June 2012.

J Robert Brown Jr.