Responding to the Prime Minister’s article in the Observer on Sunday 21st January, suggesting the Government will take action on executive pay and protecting pension schemes, Roger Barker, Head of Corporate Governance at the Institute of Directors, said:
“If the fallouts from BHS and Carillion have taught us anything, it is that pension schemes often suffer when companies collapse and something needs to be done to safeguard those who have contributed to them. However, significant policy decisions should never be made in the heat of the moment.
“If the Prime Minister is serious about these proposals, there needs to be extensive consultation with involvement from industry to ensure we strike a balance that safeguards all stakeholders including current employees, pensioners and shareholders. As ever with these proposals, the devil will be in the detail – but we must ensure there are no unintended consequences that might impact the health of currently successful companies.
“On the issue of clawbacks, the UK Corporate Governance Code as it stands has little to say about the circumstances in which they should occur. In its forthcoming response to the current consultation on the Code, the IoD will propose that the collapse of the company should always be included as a trigger for bonus clawbacks in the employment contracts of top executives.”