Nearly 40% of Centrica’s shareholders voted against the board’s pay plans at the energy company’s annual investor meeting in Manchester last Thursday (8 May), according to The Guardian (9 May).
Centrica's CEO, Chris O’Shea’s basic salary rose 29% last year to £1.1m, taking his total pay packet, including bonuses and share-related pay, to £4.3m for the year.
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Scrutiny around executive pay is linked to engagement and trust, said Liz Sebag-Montefiore, director of consultancy 10Eighty.
She told HR magazine: “How a company rewards staff and executives sends a clear message about its values. HR should report on employee rewards transparently and candidly. Ideally, HR should be able to demonstrate how the remuneration policy links executive pay to the organisation’s overall performance, including environmental, social and corporate governance (ESG) measures.
“It’s important that we can articulate the rationale behind pay decisions with clarity, empathy and consistency, especially as employees are increasingly vocal about whether pay across the organisation is fair and reasonable.”
Workforce representation on boards is crucial, Sebag-Montefiore added. She said: “Workers see unfairness and greed while they themselves struggle from pay cheque to pay cheque.
“HR ought to play a key role in encouraging business behaviours that benefit firms, employees, shareholders and society.”
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According to The Guardian, shareholders were recommended against supporting O’Shea’s pay packet by proxy adviser Institutional Shareholder Services (ISS). ISS told its clients the pay rise was “materially above those given to the wider workforce".
HR leaders should push for open communication from boards about the rationale behind pay decisions, added Jim Moore, employee relations partner at consultancy Hamilton Nash.
Speaking to HR magazine, he said: "This gives HR leaders the difficult but necessary job of pushing for greater transparency and accountability around remuneration decisions at the top. That means ensuring pay frameworks are tied to clear, measurable performance indicators that are understood across the organisation, and not just rubber-stamped by a faceless remuneration committee.
"To keep everything visible and above board, HR can arrange town hall meetings, Q&A sessions, and work on internal messaging that helps leaders articulate their decisions in a way that makes sense to employees. Transparency doesn’t mean that every pay decision will be popular. But it does mean employees and stakeholders are more likely to accept them if they understand the ‘why’ behind the numbers."
