Howard Davies once compared the media to a pack of beagles casting for scent. The best tactics for a hare stuck in the same field was to stand stock still where it could frequently remain unnoticed. In the heated debate over executive pay several key issues have stayed motionless and undisturbed. As Chris Blackhurst makes clear in Who Lets Pay Run Away? (p36) the managers of institutional funds have very good reason not to create a fuss over unseemly self-indulgence by boards of directors. Their own earnings are so far ahead of their industrial contemporaries' - at all but the highest levels - that it is impossible for them to comment. Those in City glass houses are shrewd enough to know when not to throw stones.
But this is part of a larger issue that the executive pay debate failed to identity: there is no clear understanding of who does have responsibility for British quoted companies. The directors are hired hands, the fund managers' job is to swell the funds under their management, while the trustees to whom the fund managers report view their responsibility as satisfying obligations to current and future pension-and policy-holders. These latter groups lack the mechanisms, authority and knowledge to do any thing. The danger is that the Government will believe it has a role in overseeing corporate behaviour.
To prevent this, more is needed from all of those who play a role in quoted companies. Directors must be more alert to the public sensitivity of their roles. Fund managers (including the insurers) must perceive it as a duty to vote their shares at AGMs and to take every opportunity to improve the performance of the companies in which they are invested. More importantly, trustees must ensure that the concerns of those who ultimately own the capital they administer are not ignored.
Greenbury and the Whitehall farce
Sir Richard Greenbury has said that he will never take on a public role again. Many British managers will fervently hope so. The committee was established primarily to reduce the salaries of the privatised utilities' directors; its main achievement has been to end the favourable tax treatment of a performance incentive for middle management.
The ineptitude of the recommendation - and its implementation by the Government - was breathtaking. Share options may lack precision as a performance-related incentive but most managers will acknowledge how difficult it is to find precise tools to link pay with performance. Properly used, the scheme offered a tax break to involve middle managers in the broader performance of their companies and to encourage loyalty.
Hopefully the Chancellor was merely clearing the decks for a new incentive to encourage staff to participate in the overall performance of the company. We look forward to seeing it in this year's budget.