A collective cold shudder of fear went through the City last week after seeing Fred Goodwin being stripped of his Knighthood and RBS execs give up on their bonus. "So were will this leave us?" you could almost hear executives whispering on the freezing streets of London. Well, as far as possible action from the Government goes, I would not worry too much if I were you.
Afraid as ever to take an unpopular stance with the majority of voters (read: the non-bankers) but also realising they need the City, the blue ties appear to be leaving it up to pension fund trustees to become 'the referees' in the fight over 'fat cat' pay plans.
Dan Billingham's article in Pension Funds Insider last week rightly points out that trustees are probably not the most suitable candidates for this role. Sure, they are more suitable than the members of the Occupy protest that are left scattered in the City, but aside from the fact that - and I quote - they are a "hesitant bunch on these issues", we can firmly state that their interests lie elsewhere and that their resources are often limited.
In the Netherlands, schemes actively use their voting power, often to the max. The Dutch like to be transparent and as the biggest Dutch schemes are not linked to one sponsor, they are free to take a stand without having to take their own sponsor company into consideration.
But would trustees over here in the UK knowingly change their culture and risk causing chaos within a company's board structure, which could result in dropping share prices? That sounds to me like the proverbial 'shooting yourself in the foot' approach.
And how much is too much? After all, RBS saw a complete overhaul of their bonus system two years ago and now, with the new guidelines in place, the bank was still seen as the English version of Berlusconi; filling its pockets with gold while the average worker pays for the damage.
It is good to see however, that the big players of the future, such as NEST and our friends from Denmark for example, are planning to take on a more activist role on boardroom pay. But whether they will be prepared to criticise high pay packets remains to be seen.
One of the people who talked to Pension Funds Insider, pointed out that if trustees do not react 'adequately' then regulation may follow. Although the disclosure of voting records for asset owners is still not mandatory in the UK it does make for a great threat.
But, as with many threats coming from Westminster, it is nothing but hot air at the moment. And there's certainly not enough of it to melt the icy attitude pension scheme trustees have to their supposed role in holding down executive pay.
azeevalkink@wilmington.co.uk
