High levels of executive pay are the biggest threat to public trust in business, according to research from the High Pay Centre.
The think tank surveyed 1,000 members of the Institute of Directors (IoD). More than half (52%) of IoD members identified ‘anger over senior levels of executive pay’ as a threat to public trust in business.
Slightly fewer members (51%) said product mis-selling or unsympathetic portrayal of business in the media were impacting negatively on public trust.
Almost half (48%) either agreed or strongly agreed that falling trust in business is a significant threat to the success of their own company. However, a quarter (26%) said it is not important.
Only 13% of the IoD members said they are mainly motivated by financial reward; 54% said they are driven by a desire to build a successful company.
High Pay Centre director Deborah Hargreaves said the findings “destroy” the argument that criticising excessive executive pay is “somehow anti-business”.
“Outside the boardrooms of big corporations, ordinary small- and medium-sized business owners are as appalled by the culture of top pay as anybody else,” she added.
“When big business leaders rake in seven or eight figure pay packages every year… we are clearly seeing a corporate governance failure rather than a fair and functional free market. Ordinary workers, customers and wider society, not to mention shareholders, are being ripped off.”
IoD director general Simon Walker said that while performance-related pay can drive success, in some areas executive pay has become “so divided from performance that it cannot be justified”.
He added: “Large companies need to look closely at the role excessive pay is playing in fuelling an anti-business backlash from the public and some politicians.”
Walker urged remuneration committees to take note of last year’s backlash by shareholders, where several companies saw their shareholders vote against excessive pay packets for top executives.
He added: “There is a responsibility on the part of directors and boards to restore the link between long-term performance, accountability, shareholder return and executive rewards.”