Pension fund managers should clamp down on excessive executive pay – but they won't
Vested interests are keeping pension fund managers from acting in the best interests of their members, says Merryn Somerset Webb.
We've expressed our frustration about the super-high salaries modern CEOs like to pay themselves many, many times (see past posts on everything from the talent myth to the effect of performance-related pay on capital investment, wages and inequality).
But we always hold out some hope that the fund management industry will save the world. After all, they are the ones holding the real power here they can vote for or against all remuneration packages. Sometimes they do. Mostly they don't. There are some clues as to why in the FTfm sectiontoday.
An analysis of 14 of the world's largest pension funds has apparently "prompted condemnation over the vast gulf in earnings between chief executives and scheme members".
The chief executive of the Ontario Teachers' Pension Plan was paid $4m in 2013, while the Canada Pension Plan Investment Board paid its top man $3.1m. That's more than some of the most highly paid fund managers in the private sector (which is saying something!).
Does this matter? I think it does. Partly because it is a waste of money (money that belongs to the fund beneficiaries), but also because, as Deborah Hargreaves of the High Pay Centre puts it, "These figures highlight why we cannot rely on pension funds to hold companies to account on pay. These pension chief executives are benefitting from the high-pay culture themselves and often see nothing wrong with multi-million-dollar awards for top bosses". And so the rounds of over payment go on. And on.