BONUSES awarded to executive directors that exceed 100 per cent
of their basic salary, should be challenged by the national
investing bodies of the Church of England, a new policy published
by the Church's Ethical Advisory Group (EIAG), states.
The policy on executive renumeration has been adopted by the
investing bodies, which will use it to determine their voting on
the renumeration reports of the companies in which they hold
shares.
James Featherby, who chairs the EIAG, said on Friday: "Executive
directors perform difficult and important roles that require high
levels of skill, enterprise and innovation. All staff should be
rewarded fairly and executive director roles understandably command
good salaries . . . We want to see lower annual bonuses and greater
emphasis on rewarding executives who manage ethical, social and
environmental issues well and so deliver enduring corporate success
over periods of five to seven years."
In creating the guidance, the EIAG drew on theological and
biblical studies, and a range of views held in the Church of
England today. It notes that: "When material rewards become vastly
unequal, it becomes harder for people to perceive the truth of
equality before God".
However, it suggests that, in drawing up a Christian ethical
policy, there is a need to balance idealism and realism, justice
and self-interest: "Of course, Christians will hope that people of
ability will take on responsibilities and burdens gladly and
sacrificially on behalf of the common good. Yet this ideal is
tempered by the awareness that human frailty puts the perfect
realisation of Kingdom values beyond our reach and some concessions
from the ideal must be made if the fallen world is to embody the
godly virtues of peace, justice, sustainability and creativity as
well as the ideal of equality."
Differentials in renumeration can be justified "by some
reasonable calculus linking higher rewards to greater contribution,
skills and responsibility". Those who are lower paid must also be
rewarded "fairly".
Analysis cited in the guidance suggests that executive
renumeration has become "misaligned with revenues, profits and
shareholder returns". Between 2001 and 2011, the median annual
bonus potential for a chief executive of a FTSE 100 company
increased from 60 per cent of basic salary to 150 per cent. It is
rare for a chief executive not to receive a bonus, the report
says.
Church investing bodies are advised to "use discretion" when
implementing the principles set out in the guidance.
The policy concludes of the culture of renumeration: "Turning
the tide will take courage and leadership from both the
non-executive directors who determine remuneration and the
executive directors who receive it. . . We will work
collaboratively and in particular support companies who take risks
and model a different way of doing things."
Last year, the secretary of the Church of the EIAG, Edward
Mason, said that there was a "systemic problem" of excessive pay
for company executives (
News, 3 February, 2012). In 2011, the Commissioners and
Pensions Board of the Church of England supported only about 35 per
cent of remuneration reports in the UK companies in which they have
holdings.