How fund managers have failed us all on boardroom pay

The financial services industry is supposed to operate as capitalism's watchdog. Its inability to fill this role properly means that government now feels forced to step in.


Theresa May is promising to curb executive pay and put employees on company boards.

When I went into see the managers at Lindsell Train a few weeks ago (subscribers can read the full interview here) there was, I thought, only one dud note in our conversation.

When we talked about executive pay, they spoke of how important it is for the structure of incentive payments to be right (so that only good things are incentivised) but they showed no interest in the ridiculous absolute levels of pay this means that company executives end up with.

As far as they are concerned, payments in the tens of millions are probably needed to keep "talent" on board and anyway are a tiny amount in the great scheme of a large company's costs.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

I disagree on the first point (see endless previous articles) and think the second is beside the point. The British have a pretty good tolerance for inequality, but, as with everything, there are limits. And as I have been saying to the UK's fund managers for over a decade now, if you don't do something about boardroom pay, one government, one day, will do it for you and you won't like that.

I might be about to be proven right (on both points). Look at the candidates for the Tory leadership: Andrea Leadsom (who Boris Johnson tells us has the "zap, drive and determination to be our leader") would clearly like to be having a go at executive pay.

Here's a line from her speech last week: "The importance of wealth and job creation is core to all my beliefs, but the richest people of Britain should know that they will not be my priority. And those people who have become rich by winning boardroom pay rises that bear no relation to company performance should be aware that I find this unacceptable."

Theresa May is clearly on the same page (as was Gove, by the way). In the Times today, she promises to curb executive pay and to install employees on company boards.

The UK's big shareholders and the big boardrooms they are supposed to keep an eye on for us have had endless chances to have a go at fixing the pay problem themselves. They haven't done it. Now the problem so bad that it looks as if a Tory government is going to have a go at fixing it for them.

That's a political shift that marks a major financial industry failure. And rather a shameful one at that.

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.