Renowned fund manager Neil Woodford has criticised the industry for what he described as “frustratingly rife” short-termism, in his support of the movement towards more “appropriate” ways of paying top executives.
Mr Woodford, who is one of the most prominant names in the UK fund management industry, has said top executives should be held more accountable for the long-term performance of their companies.
His comments come as part of a report from think tank the High Pay Centre, which sets out to overhaul the way executives of companies are paid, arguing shareholder interests are often not served by top bosses who “over-compensate” themselves.
Lending his support to the group, the founder of Woodford Investment Management said he does “everything he can” to ensure the executive and board of a company are aligned with shareholders in order to generate long-term value.
But he said: “Regrettably, this view and approach is not shared by many in the UK investment industry and I believe the problem is getting worse.
“Many fund managers do not behave or think like owners, because they are borrowing stock rather than investing in it.”
Just last week Woodford’s company went against the grain by announcing it had ditched staff bonuses, with its chief executive Craig Newman describing such regimes as a “distraction”.
In the High Pay report released today (1 September), Woodford said the main fund groups were failing to align their investment responsibilities with corporate governance duties.
He added: “Short-termism, which is frustratingly rife in fund management, hinders the UK’s institutional investment industry’s ability to hold executive management teams to account in an appropriate and effective way.”
The report, compiled by MP Chris Philp, called on the mandatory publication of pay ratios, comparing executive remuneration with the average worker’s pay.
It also called for the introduction of annual binding shareholder votes on executive pay, a move which is supported by prime minister Theresa May.
According to Mr Philp, the industry has moved towards what it described as “ownerless corporation” which has in turn led to the rise in executive pay.
Total pay for chief executives of FTSE 100 companies now averages £6m per year, or 150 times average worker income, the report stated, adding this ratio has doubled in 10 years as worker pay has stagnated.
katherine.denham@ft.com
