I once came up with an idea which I thought might make a difference to the bad press that corporate directors were getting. It was really quite a simple idea and it would give the shareholders more control over their savings.
First of all, all directors of public limited companies (PLCs) would not be allowed to earn more than £50,000 a year as their basic salery.
Secondly, they could earn as much as they wanted in the way of annual bonuses.
They could decide themselves on the criteria that the bonuses will be paid and it wouldn’t matter if they decided the bonuses could be paid of there was any rainfall in Manchester over the last year – or anything else as daft as that. It would be OK.
But here’s the rub, which would ensure that wouldn’t happen.
The criteria laid down for the bonus to be paid – for each director – would have to be printed in the Company Reports that is sent to shareholders. Anything daft like my illustration above, or anything sounding unreasonable, would get the shareholders flocking to the AGM calling for the offenders head – or, at least, his resignation.
Also, at the AGM, each director would have to justify (a) their choice of criteria and (b) the amount of their bonus in relation to that criteria.
This may not result in huge savings but not only would there be savings, but the greedier the executive, the harder he would have to work his arse off.