After business secretary Vince Cable announced plans to force firms to hold binding votes on executive pay every three years, recruitment consultant Drayton Partners warned that UK food and drink manufacturers needed to pay “the going rate” to attract bosses of the calibre of Premier’s Michael Clarke.
Drayton partner Ian Pickett told FoodManufacture.co.uk: “I don’t know how much Michael Clarke earns. But many agree, he’s made a good start at turning around the fortunes of Premier Foods.
“If Mike’s package had been related solely to the profitablility of Premier, the firm would not have been able to attract a manager of his calibre. Indeed, without his vision around power brands, it’s questionable whether the business would be in existence.”
Remuneration packages for top executives should reflect the fact that UK food and drink manufacturers operate increasingly in a global market, said Pickett.
More firms looking to recruit top executives are specifying global searches, he added. “Companies see their overseas competitors developing innovative approaches to business. Growing numbers are thinking:we would like to apply that edge in the UK.”
Pickett said: “It’s easy to criticise so-called fat cat pay. But how will UK businesses survive and prosper unless they can attract talent?”
Last week Cable announced plans requiring firms to publish one figure every year showing how much executives had been paid. Companies will then have to stick to their pay plans for the next three years or hold another shareholder vote.
Cable said the plans would lead to "stronger, clearer link between pay and performance".
Currently, shareholders can vote on executive pay packages every year. But such votes are not binding and, in theory, boards can ignore the vote.
Shadow business secretary Chuka Umunna said the plans should have included an annually binding vote.
But Pickett argued that an annual review would encourage short-term views – which could disadvantage businesses. “It is better for food businesses, particularly firms the size of Premier Foods, to have three-year reviews.”
Cable’s plans to curb excessive boardroom pay come after what some have called ‘a shareholder spring’ when shareholders voted down several top bosses’ pay packages.
Last week shareholders rejected the executive pay report of the globe's largest advertising group WPP. The report included a £6.8M pay deal for WPP ceo Sir Martin Sorrell.
In May, shareholders in the insurance firm Aviva rejected its remuneration report.
But John Vincent, founder of the Mediterranean fast food chain Leon Restaurants, said the row over executive pay was “a bit of a red herring”.
He told the BBC Radio4 business programme The Bottom Line last week: “There’s an absolute lack of visibility about the truth of what goes on in businesses.
“And so [executive] pay becomes something they [shareholders] can pounce on. But it is a sideshow – the real issue is, what is the performance of the business? That is totally separate from pay.”