Last autumn, amid the maelstrom of the financial crisis, it seemed that fundamental change was afoot. “A new capitalism will emerge from the rubble”, declared the BBC's business editor, Robert Peston. And in the court of public opinion, driven to the point of fury by tales of huge bonuses in a failing banking sector, nowhere was this change more keenly sought than in the sphere of executive pay. Vince Cable, the Liberal Democrat Treasury spokesman, even suggested that failed but wealthy bankers should count themselves “lucky the British have no guillotines in stock”.
Several months later, some evidence indicates that the widespread desire for a brake on executive pay might be beginning to be realised. In the UK, shareholders recently rejected Shell's executive remuneration plan, and have also registered significant “no” votes against pay deals at major companies such as Xstrata, BP and Amec.
“Clearly, most CEOs at large companies were not immune to the financial fallout from the economic crisis and stock market losses of the last year,” says Ira Kay, global director of compensation consulting at Watson Wyatt and co-author of Myths and Realities of Executive Pay. “Pay packages will be realigned to reflect the new economic reality that is currently unfolding.”