Yahoo Finance Stop vilifying high pay in Britain, City chief urges
Britain is being held back by a campaign against high pay, the head of the London Stock Exchange (LSE) has warned.
Julia Hoggett said a pay disparity between UK chief executives versus their US counterparts had “not received enough attention” and called for a level playing field to stem an exodus of companies from the Square Mile.
Her comments came just hours after the Financial Conduct Authority (FCA) said it would slash red tape and shake-up London’s listing rules in an effort to reinvigorate the stock market.
In a statement on the LSE’s website, Ms Hoggett called for a “constructive discussion” on how Britain approached executive pay.
She said: “We should be encouraging and supporting UK companies to compete for talent on a global basis, so we remain an attractive place for companies to base themselves, stay and grow.
“The alternative is we continue standing idly by as our biggest exports become skills, talent, tax revenue and the companies that generate it.”
Boardroom pay has long been more lucrative in the US compared with the UK, where more restraint is typically advocated.
Mark Freebairn of Odgers Berndtson, a City headhunter, said US companies typically paid around 10 times more than for the same job in the UK.
He added: “This limits the ability of UK firms to persuade credible candidates to the UK and inhibits the retention of international talent.
“A ‘comply’ rather than ‘explain’ culture around executive pay has become a contributory factor to whether boardrooms want to list in the UK, move to the US, or opt for a private takeover.”
Ms Hoggett criticised the decision of some shareholders and proxy advisers to vote against executive pay policies in the UK “even when those pay levels are significantly below global benchmarks”.
She said: “Often the same proxy agencies and asset managers that oppose compensation levels in the UK support much higher compensation packages in different jurisdictions, notably in the US.”
On Wednesday, shareholders rejected Unilever's pay report after proxy advisers said its new chief executive’s salary was excessive.
Nearly 60pc of shareholders rebelled against the company’s remuneration report following recommendations from ISS and Glass Lewis, two of the City’s most prominent shareholder advisers, to vote against it.
Glass Lewis said it had “severe reservations” about supporting the pay report as Unilever’s incoming chief executive’s fixed pay “significantly exceeds both their predecessor's and peers”.
Hein Schumacher, who will take over as chief executive in July, was set to be handed an annual salary of €1.8m (£1.6m) before bonuses. The pay report recommended that current boss Alan Jope be given €1.6m in fixed pay.
Among the FCA’s proposed reforms to make the City more attractive, compulsory shareholder votes for large transactions would be removed, while eligibility rules that require a three-year financial track record as a condition for listing would be scrapped.
The proposed overhaul comes after the number of listed companies in the UK has slumped by 40pc since 2008, with a string of companies including the British tech pioneer Arm recently snubbing the London Stock Exchange in favour of New York.
The Centre for Policy Studies, a Conservative-leaning think tank, said the measures would not provide the “silver bullet” needed to boost the London stock market.
It added: “It is important to look at the financial ecosystem in the round, addressing the UK's growth and patient capital gaps, as well as wider cultural issues in the UK such as our attitudes to executive pay and risk.”
Flutter, the owner of Paddy Power and Sky Bet, said on Wednesday it will forge ahead with plans to move its listing to the US despite the FCA reforms.
Peter Jackson, chief executive of Flutter, insisted the decision to launch a secondary listing in the US later this year would have “no bearing on investment in the UK”.
Speaking hours after the Government announced reforms to cut red tape around firms listing in the UK, Mr Jackson said: “Acquiring a US listing would enable us to switch our primary listing at a later date.
“It’s about the pull factors. Nearly 60pc of our global stakes in sports are now done in America.”
CRH, the FTSE 100 buildings materials business, has also signalled its intention to move to the US. Ferguson, the blue-chip plumbing company formerly known as Wolseley, crossed the Atlantic last year.
