Deciding on top pay by committee

Growing public criticism of the compensation packages given to the top executives of publicly held UK companies has led to calls for improved corporate governance through the appointment of more non-executive directors and the establishment of remuneration committees that could independently evaluate executive pay packages. A survey of 220 large publicly held UK companies reveals that 30% have already established remuneration committees. However, an analysis of pay packages given by these firms shows that these remuneration committees tend to increase top executive pay by a margin of 18% over that of executives at companies that do not have such committees. This disturbing pattern has been traced to the failure to appoint non-executive directors who place shareholder interests above those of the CEOs that they report to on the company's board.