Fat cat pay row threatens reputation of British bosses

91 per cent of UK bosses feel that the public perception and media profile of directors of major UK businesses is in need of improvement following a series of public rows over ’fat cat’ pay and ’rewards for failure’, according to research published today by The Aziz Corporation, the UK’s leading independent executive communications consultancy.

These findings come in the wake of Sir Peter Davis’s resignation from

J Sainsbury following shareholder uproar over his acceptance of a 2.4m bonus at a time of falling sales and profits and the previous bungled appointment of Sir Ian Prosser.

With the average salary and bonus package of a FTSE 100 chief executive now standing at 1.5million*, company directors need to be aware that they are leaving themselves increasingly open to potentially damaging criticism if they are unable to demonstrate their worth. According to the research, 89 per cent of company directors agree that if business leaders were seen to be good ambassadors for their companies, then they would be less likely to come under fire for their remuneration packages.

Khalid Aziz, Chairman of The Aziz Corporation who commissioned the survey, commented: While there may be an argument that these large salaries are important in retaining top performers, these have been overshadowed by large pay packets and ’golden parachutes’ for executives leaving companies which have under-performed. No amount of great communications will work if you’ve failed to do the business, however the actual policies need to be transparent.

The research found that 92 per cent of company directors feel that the backlash against ’fat cat’ bonuses and pay increases could have been lessened if UK board executives had greater visibility and ensured that their achievements were more obvious, and 84 per cent think that companies could have handled the issue better through the media.

Khalid Aziz adds:

Behind these findings lies the issue of whether companies have strategies in place to explain pay issues. 51 per cent of the directors who took part in the research stated that their company had no specific policy for communicating executive remuneration strategies to stakeholders.

This latest incident, like the failed attempt to install Sir Ian Prosser as Chairman, highlights fundamental flaws in the way Sainsbury communicates with its shareholders. Investors are rightly demanding greater consultation over pay and other issues. Hopefully a start has been made with the consultation over the appointment of Philip Hampton as the new chairman.

* Financial Times, January 2004