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Board pay is well down list of business priorities

April 2011

Introducing transparency on boardroom pay comes bottom of the list of urgent corporate responsibility tasks compiled by most companies, new research has shown.

A study from the influential Economist Intelligence Unit has found that introducing energy efficiency measures is the most common corporate priority in the CSR field over the next three years, cited by 50 of just under 100 senior executives polled from around the world.

By contrast, tackling boardroom pay was mentioned by only one per cent of respondents as being important, way below even issues to do with board member selection, which 13 per cent said was a key priority.  

Study author Aviva Freudman, research director of the Economist Intelligence Unit, said the findings appeared to suggest that the potential for cost savings is a key factor in determining which sustainability goals are followed most determinedly by companies.

Although ‘fat cat’ pay can be damaging reputationally, the cost savings from reducing senior executive remuneration are relatively small compared with reducing energy use or  improving health and safety.  Freudman also pointed out that reducing carbon dioxide emissions came relatively low down the list of priorities , possibly for the same reason  (eighth of 13, cited by 18 per cent as a priority). Reducing a company’s carbon footprint often has a ‘heavy cost’ but a less obvious financial payback, she said.

However, some sustainability goals with less tangible cost outcomes still made it into a high position on the priority list – such as increasing ‘general accountability and transparency to all stakeholders’, cited by 33 per cent as a priority, and ‘promoting local community relations’ , mentioned by 26 per cent.

The study also showed that the most commonly claimed corporate motivation for promoting environmental, social and governance improvements was ‘doing the right thing ethically’ (57 per cent) – ahead even of ensuring long term profitability (49 per cent), or complying with laws and regulations (47 per cent).

Relatively few said they had been spurred into action by pressure from NGOs (seven per cent) or socially responsible investors and analysts (four per cent).

The research drew responses from 99 senior excutives worldwide, the majority of them at chief executive, president or managing director level, with high response rates from those in India, the UK, and the US.




Economist Intelligence Unit | Global | Transparency

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