Journalists and politicians must not have enough to do in the post-Christmas dip. "Action looms to curb executive pay" proclaims the FT on January 5 the day before the UK's Prime Minister David Cameron devotes precious prime time on Radio 4's flagship breakfast talk show "Today" to declare he is "not satisfied with top pay".

To quote the FT: "Nick Clegg, the deputy prime minister, has denounced a system of “crony capitalism” in which senior business figures appeared on various company boards, often setting each other’s pay." and "proposals to change the structure of remuneration committees, which politicians have complained are “closed shops” of vested interests, are proving divisive. Policies under consideration include barring executive directors at FTSE 100 companies from chairing remuneration committees at other companies."

Given the facts of the situation its hardly surprising there's division.

Contrary to popular misconception, the existing provisions of the UK Corporate Governance Code (the culmination of market comply or explain consensus, not proxy advisor hegemony) have proven effective in that there are very few cross memberships of remuneration committees and indeed the overwhelming majority of FTSE 100 remuneration committee members do not sit on any other FTSE 100 remuneration committee.

Based on Manifest’s analysis of annual reports as at 30th June 2011 the situation is as follows:

Table 1: FTSE 100 Cross-directorships

FTSE 100 cross-directorships

Number

%

Sample of FTSE 100 companies analysed

97

Total number of directors serving at some time in year

1005

Number with one FTSE 100 directorship only

882

88%

Directors on two FTSE 100 boards

105

10%

Directors on three or four FTSE 100 boards

18

2%

Executive directors on board of another FTSE 100 company
(as a non-executive director)

52

5%

…of which an executive director in turn serves on their board

0

0%

…of which an NED in turn serves on their board

1

0.1%

Next, let us look at the situation when it comes to serving executive directors who sit on other companies remuneration committees

Table 2: FTSE100 Live Execs on Other Remuneration Committees

Company

Remuneration Committee Role

Individual Surname

Is Exec At

Aggreko

Member

MacLeod

Johnson Matthey

AMEC

Member

Carson

Johnson Matthey 

Burberry Group 

Member

Bowman

Smiths Group

Capita Group

Member

Wilson

Legal & General Group

Centrica

Member

Meakins

Wolseley

Compass Group

Member

Bason

Associated British Foods

Compass Group

Member

Robert

Experian

HSBC Holdings

Member

Laidlaw

Centrica

Imperial Tobacco Group

Member

Williamson

International Power

ITV

Chair

Haste

RSA Insurance Group

Kingfisher

Member

Bonfield

National Grid

Marks & Spencer Group

Chair

Holliday

National Grid

Next

Member

Salway

Land Securities Group

Reckitt Benckiser Group

Member

Cousins

Compass Group

Reckitt Benckiser Group

Member

Mackay

SABMiller

SABMiller

Member

Armour

Reed Elsevier

Severn Trent

Member

Lamb

IMI

Unilever

Chair

Walsh

Diageo

Whitbread

Chair

Cheshire

Kingfisher

WM Morrison Supermarkets

Member

Cox

International Power

Note: Haste left RSA at 31 Dec 2011

By using yet more bad data and to enable quick "appearance fixes" which do little to solve the real problem of excessive pay we run a serious risk of undermining an important debate. The excessive pay of bankers/the city has been conflated with high pay in industry. They are not the same problem.

We see a definite benefit to a provision in the Code that the remuneration committee should not comprise a majority of  former public company CEOs. This should not be restricted to former/current directorships of UK companies – there is a particular need to include US company directorships in this provision given the endemic reward-for-failure bias of US remuneration systems.

It might seem a tad churlish to turn away ministerial attentions after corporate governance has languished on the sidelines for so many years BUT given the extensive governance wish lists of  the investors we work for (board diversity, accounting standards reform, Big 4 dominance, free-float issues, sustainability......), Ministers might want to ask themselves a couple of questions about priorities:

1. Which are more damaging to corporate performance – Investment Bankers (current or former) or CEOs?
Investors have no control over the former, the latter (in the UK at least) can be voted on and in extremis, be removed by simple majority; and 

2. Is it more important to legislate against (literally) a handful of directors rather to tackle the vested interests of custodian banks which perpetuate barriers to effective cross border voting?

If one remuneration consultant controlled 97% of the remuneration policies of FTSE100 companies, MPs would be falling over themselves to legislate. Regrettably no-one bats an eye-lid that custodian banks used pooled nominee accounts to dictate that 97% of ALL shareholders votes are forced to be processed through an American voting system that's not fit for purpose in the UK (vote tapping is only the thin end of the wedge) and which the SEC reckons is not up to the job in the US either.