Ten years on, has HR learned any lessons from the financial crash?

3 Sept 2018 |Stephen Bevan, Director, Employer Research and Consultancy

Executive remuneration

In recent years there has been real concern that deliberations of some remuneration committees have not been guided in any meaningful way by the advice of HR specialists. The risks of bonuses or share options containing ‘perverse’ incentives or focusing inappropriately on short-term gain or ignoring the wider principles of distributive justice within an organisation are well documented. Despite increased scrutiny by both activist shareholders and by the press, the gap between CEO and median pay in UK businesses has continued to widen. The latest High Pay Centre/CIPD data, for example, shows that CEO pay rose by 11 per cent in 2016–17 and that the mean pay ratio in FTSE 100 companies was 145:1 (up from 128:1 in the previous year). So, HR faces a big challenge if it is to re-establish a credible and moderating influence here, especially as there is considerable doubt that the requirement to publish pay ratios will make as much of a difference as is hoped.

Complicity through inaction

The second area is the risk of HR complicity through inaction. There have been too many examples in recent times when HR professionals have seen (or even colluded in) systematic bad practice or turned a blind eye to unethical decisions which have been driven by aggressive business targets or the Darwinian clamour to out-perform the competition.

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