Reward Directors Circle - Executive Pay: In the Eye of the Storm

Frazer Jones’ Reward team hosted its quarterly Reward Directors Circle on the 4th June at our London head office. Thirty Heads of Reward from businesses such as Mondelez, Freshfields, John Lewis and BP joined us for the insightful round table discussion.

We were delighted to welcome Charlotte Abbasi as our guest speaker who led an extremely engaging and provocative debate around executive compensation. Since 2008 Charlotte has worked as Compensation & Benefits Manager EMEA & VP of HR at CitiGroup and Head of Compensation & Benefits at Catlin Underwriting Agencies.

Charlotte chose to lead the evening’s discussion on the issues surrounding executive pay. Following the financial crisis of 2008 there has been an apparent and significant focus on reward, which amounted to controversy and escalating public anger. Not uncommon to any issue raised in the press, individuals have therefore been scrutinised and numbers have been exaggerated. Those outside of the ‘square mile’ have formed their opinions on executive pay, leaving those within the business trying to navigate a commercial conversation versus a political one.

Charlotte questioned whether holding a role within a company’s reward team allowed you to feel like an honest broker and invited ideas of motivation within this suggested role. She opened her discussion to the table, welcoming the experiences of other Heads of Reward. One interesting motivation stemmed from the simple idea of trust. When making changes, even when detrimental, sometimes all that is needed to gain acceptance is honesty and transparency. If employees can appreciate the equality and fairness within the workplace then we will see an improvement in the way reward changes are ‘digested’. And it is this word that resonated strongly around the room: 'fair'.

Charlotte concluded her topic of executive pay by introducing a variety of extremely thought-provoking views regarding the debate surrounding ‘high pay’. On the one hand, arguments towards the idea that high risks should receive high rewards seem to prevail. On the other hand, anxiety stemming from high pay suggests potential social consequences of income inequality.

As Richard Wilkinson and Kate Picket said in their book 'The Spirit Level', “Once a country has reached a certain economic point and standard of living, all key indicators of a society’s well-being – from life expectancy to teenage pregnancy, from rates of violent crime to illiteracy. From deaths from heart disease to reported levels of trust……are affected not by how wealthy a society is, but how equal, it is.”

The Director of the Frazer Jones’ Reward team, said: “Charlotte’s accounts of her recent experiences with the Remuneration Committee were very honest and she provided some examples of the challenges that she encountered along the way, highlighting potential pitfalls. Her ideas were thought provoking and generated interesting debate from Reward Directors with a variety of industry experience.”

Brad Law, from our International Reward Practice, said: “It was great to see the recognition of the non-technical elements when dealing with executive pay topics that were so critical to success, such as communication, stakeholder management and relationship/trust building (both in and outside the business). How some of these elements were managed almost required more attention than shaping executive compensation itself.”