HR REWARD AND BENEFITS
organisation. “In some companies, HR directors can have a very ‘hands-on’ role with regards to executive pay, whereas in others it is still firmly in the control of the remuneration committee. Also, the fact there is only going to be a binding shareholder vote once every three years does not suggest HR needs to be that heavily involved on an ongoing basis. “HR may facilitate the process, but it definitely will not
lead it. That will be down to the chair of the remuneration committee, investor relations, in-house legal, and external consultants,” he adds. However, Maude believes it is an opportunity for HRDs to
show the value of the function. “There is no doubt remuneration committees will call upon HR for more advice, particularly with issues such as comparing top executive pay and benefits to that of the rest of the workforce. This will definitely enhance the profession’s reputation.” Jim Wright, employment partner at law firm Cobbetts, also
believes the binding shareholder vote represents a great opportunity for HR to demonstrate its value-adding capabilities. “The remuneration committee is usually made up of non-executives who have either been executive directors,
or who are executive directors in other
organisations. As a result, there can be a tendency in some companies for remuneration committees to approve executive reward schemes based on how they themselves have been rewarded in the past. “Cable’s reforms will change that, and remuneration
committees will want expert guidance and reassurance from HR that the metrics they are using to determine top pay are the right ones that will gain investor support,” says Wright. David Ellis, head of the reward team at professional
services firm KPMG, warns there is a risk HR’s reputation could be staked on whether it has helped shape an executive pay package that is rejected by shareholders. “If having a remuneration report approved by shareholders at the AGM is a criterion for success, then that is not the most positive of goals to be driven by or judged upon,” he says.
Ellis also questions whether HR can ensure it does not get
“sucked in” to spending too much time on ensuring shareholder approval of executive pay packages. “These rules will raise the profile of HR, but the additional
effort involved may pull the function away from more strategic and value-adding work. “HR is there to manage and reward people and attract and
retain talent and to help management realise the full potential of the workforce. Executive pay is something it can advise on, but HR directors should make sure they limit their time on it: having top pay schemes approved by shareholders does not add value to the business.” HR
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20 HR Supplement September 2012
hrmagazine.co.uk
1111078-HR-SA1
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