The attack on shareholders by Bill Winters, chief executive of Standard Chartered, for opposing remuneration at the recent shareholder meeting was as unwarranted as it was surprising.While it could easily be dismissed as an individual’s ego bruised by the concerted opposition of nearly 40 per cent of proxies cast against his pay, the wider issues it raises should not be overlooked.
As Martin Sorrell, formerly of WPP, found to his cost, when chief executives step into the ring to defend their own pay arrangements, it quite often ends badly. This is simply because since the Cadbury reforms of 1992, the architecture of corporate governance practice in the UK mandates a separation in accountability and roles between executives and independent non-executives.
When Mr Winters called shareholders “immature” for their opposition to executive remuneration, he transgressed a fundamental principle of accountability. The chairman and members of the remuneration committee are accountable to shareholders through the board chair for setting and deciding appropriate levels of pay based on market indicators and performance.