The report is an extensive audit of the current debate on top pay and reveals the dramatic growth in pay experienced by those at the top of the income distribution over the last 30 years and discusses the causes of this growth.
A new ICM poll, also released this week, shows 72% of the public think high pay makes Britain grossly unequal whilst 73% have no faith in government or business to tackle excessive high pay. The poll shows that, from a range of options, the majority of the public (57%) wants top pay linked clearly to company performance, while half (50%) want shareholders to have a direct say on senior pay and bonus packages.
Chair of the High Pay Commission, Deborah Hargreaves, said: "This is the clearest evidence so far that the gap between pay of the general public and the corporate elite is widening rapidly and is out of control. Set against the tough spending measures and mixed company performance, we have to ask ourselves whether we are paying more and getting less."
Robert Talbut, commissioner, and chief investment officer of Royal London Asset Management added: "As the polling shows there is a clear public interest in tackling top pay, and increasingly there is a clear business interest too. In part because companies depend on public support but also because the evermore complicated pay packages designed to incentivise performance for top executives - that have contributed to a ballooning in pay at the top - do not appear to have worked. The clear and necessary link between executive pay and company performance appear tenuous at best.
Ahead of its final report, due in the autumn, the High Pay Commission wants to see a fair framework for fair pay that sees government and business tackling rapidly spiralling top pay through:
· Reforms on transparency
· Greater accountability
· Developing a fair framework for fair pay.
The High Pay Commission will now be commissioning additional research on the issue of high pay and developing policy proposals that could seek to mitigate or reduce this dramatic trend. The High Pay Commission will report finally in November 2011.
Commenting on the report, Jon Terry, remuneration partner at PwC, said: "The High Pay Commission has made a thoughtful contribution to the debate about executive pay. However, the range of factors identified shows that finding solutions will not be easy.
"The Commission is surely right to focus on the complexity of executive pay as having undesirable consequences - we have long argued that simplification in this area is required. But performance related pay will retain an important role in delivering the Commission's aim of fairness: if executives are not rewarded for the value they deliver, it is hard to see how the goal of fairer pay can be met.
"The focus on how boards operate, on wider issues such as succession planning, and on shareholder engagement is also generally constructive. However, as highlighted in the Walker review into the banking sector, we arguably have enough governance rules already - the focus now should be on how the various parties act within the framework that exists. Pressure on Remuneration Committees is clearly going to grow, but it needs to be recognised that shareholders, through the vote on the remuneration report, already have the tools at their disposal to rein in executive pay, should they choose to do so.
"Finally, while we support the Commission's desire for greater transparency, the unintended consequences of disclosure need to be considered. In our view disclosure often contributes to pay inflation rather than acting to restrain it.
"We look forward to seeing the Commission's fuller recommendations in due course."