Resourcing remuneration committees: in the dark or on the dark side of professionalisation?
| DOI | https://doi.org/10.1108/ER-01-2022-0006 |
| Published date | 11 October 2022 |
| Date | 11 October 2022 |
| Pages | 402-420 |
| Subject Matter | HR & organizational behaviour,Industrial/labour relations,Employment law |
| Author | Susan Shortland,Stephen J. Perkins |
Resourcing remuneration
committees: in the dark or on the
dark side of professionalisation?
Susan Shortland
The School of Organisations, Economy and Society (SOES),
Westminster Business School, University of Westminster, London, UK, and
Stephen J. Perkins
Guildhall School of Business and Law, London Metropolitan University, London, UK
Abstract
Purpose –The purpose of this paper is to examine how individuals involved in top pay determination view
their role and accountabilities, and capability development needs, theorised under the rubric of
professionalisation.
Design/methodology/approach –A qualitative research approach draws upon in-depth interviews with
non-executive directors serving on remuneration committees (Remcos), institutional investors, their external
advisors, and HR reward experts.
Findings –Regulation has addressed remuneration committee resourcing implications but has yet to
consider the ramifications for implied professionalisation requirementsfor the independent actors involved.
Non-executives’andinstitutional investors’professional engagement is potentially hindered by the capability
and capacity requiredfor the activities involved and, for NEDs, the reward attached.
Research limitations/implications –Further research is needed to evaluate professionalisation initiatives
by top pay regulators and assess their impact on executive remuneration in practice.
Practical implications –Thorough induction, tailored training, and continuous professional development
are crucial to quality executive remuneration decision-taking; organisational and regulatory attention to these
issues is required along with widening NED selection and recognition criteria.
Originality/value –This paper provides new knowledge on how top pay decision-takers view their role, the
competencies required, and necessary professional development needed to achieve organisational competitive
advantage. It reveals a potential dark side to top pay decision-taker professionalisation if individuals repurpose
themselves as occupants of part-time executive roles undermining corporate executives.
Keywords Corporate governance, Executive pay, Professionalisation, Qualitative methods, Resourcing,
Training
Paper type Research paper
Introduction
Remuneration committees (Remcos) are formally constituted committees of company boards
of directors. They are resourced exclusively from among a board’s part-time external or non-
executive office holders (Ogden and Watson, 2012). The functions applicable to the non-
executive directors (NEDs) serving as Remco members have been transformed from being “a
handy sinecure with which to end one’s career”(Keogh, 2020, p. 0). Instead, Remco NEDs have
become “key agents in ... choosing a remuneration package and arranging that it is
calibrated in a way that ensures it motivates [full-time executive board members] towards
those decisions and actions necessary to best deliver the company’s chosen strategy”(Main
et al., 2008, p. 227). The Remco’s remit extends also to influence pay governance in respect of
other senior employees, including scrutiny of overall corporate reward policies (Perkins and
Shortland, 2022). This is mindful of the need to account to company shareholders not only in
respect of the pay and conditions of executive directors, employed full-time as well as being
board level office holders, but their justification in relation to comparative reward levels
across the organisational hierarchy (Aguinis et al., 2018).
ER
45,2
402
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/0142-5455.htm
Received 7 January 2022
Revised 14 July 2022
27 September 2022
Accepted 27 September 2022
Employee Relations: The
International Journal
Vol. 45 No. 2, 2023
pp. 402-420
© Emerald Publishing Limited
0142-5455
DOI 10.1108/ER-01-2022-0006
Most of the academic literature under the rubric of executive pay adopts a quantitative
methodology. Walsh et al. (2018) point to over a quarter of a million studies informed by
statistical mining of public databases. Yet context-free, statistically driven analyses have
been limited in their capacity to explain Remco processes (Edmans and Gabaix, 2016;
Edmans et al., 2017;Frydman and Jenter, 2010;Padia and Callaghan, 2020). Considering
their interactive nature as major corporate institutions, it may be argued that analysing
Remcos needs to acknowledge their social embeddedness (Hitt and Haynes, 2018;Perkins
and Hendry, 2005;Wiseman and Faqihi, 2018). We take our cue from calls by Main et al.
(2008),Ogden and Watson (2012), and in this journal Maloa (2018) for more research
designed to obtain qualitative empirical insights into the character of Remcos. In this way
it may be possible to surface antecedents to executive pay determination affected by
Remco members’orientation to their roles (Zattoni and Cuomo, 2010) as perceived by
Remco members themselves, by the HR/remuneration specialists who advise them (Goh
and Gupta, 2010), and by representatives of the institutional investment/corporate
governance community mandated to sanction the results of their deliberations
(Janakiraman et al., 2010).
Amateurism in work settings may be judged detrimental to securing effective
employment relations –in particular, at the pinnacle of organisations where controversial
matters, including the pay of individuals employed as top executives, are determined. The UK
regulatory body, the Financial Reporting Council (FRC, 2018a,2020), positions NEDs as
central to effective corporate governance, under the scrutiny of institutional investors who
manage 90% of UK stock market listed share portfolios (Çelik and Isaksson, 2014). However,
Remcos are populated not by professionally qualified experts but by generalists (Demirbas
and Yukhanaev, 2011) and the Say-on-Pay legislation introduced initially in the UK in 2013,
empowers institutional investors in public companies to block unpopular Remco outcomes
(Lozano-Reina and S
anchez-Mar
ın, 2020;Pallavi, 2013;Stathopoulos and Voulgaris, 2016).
Codification about how to behave (or explain any normative deviance) in relation to Remco
decision-taking, under the rubric of internal governance (FRC, 2018a ) and external
stewardship (FRC, 2020) has standardised what previously emerged from the actions of
prevailing managerial interests on a company-by-company basis (Berle and Means, 1932;
Pfeffer and Salancik, 1977).
Various government and independent reviews/reports have made recommendations on
recruiting and preparing board decision-takers for their roles (BEIS, 2017;Higgs, 2003;
Tyson, 2003) yet public disquiet about top pay decision-taking regularly flows from salacious
media headlines. In the academic literature ongoing concern remains, albeit sometimes
“overlooked, ignored, or suppressed”(Linstead et al., 2014, p. 166) that thinking informing
regulatory intervention in structures to govern executive pay risks introducing a dark side –
namely, evidence of unintended, and sometimes disastrous, consequences of reward
management (Wright, 2019) being overshadowed by propositions, for example, about the
motivational power of pay and its espoused consequences for organisational outcomes. That
leads us to ask what do the individuals involved in determining top pay say about the
accountabilities placed upon them, and for capabilities to be systematically developed to meet
these (Colarelli and Montei, 1996)? Also, how might a shift from amateur to professional
status (Edwards, 2014) be theorised to improve outcomes? Our analysis, set within the
context of debates surrounding professionalisation (e.g. Baluch and Ridder, 2020;Edwards,
2014;Lynch et al., 2004;Namazi, 2018;Parsons, 1939), is informed by qualitative narrative
accounts from interviewing NEDs and institutional investors in UK-based FTSE-100
companies, together with their external advisors and senior HR reward practitioners. In the
next section we discuss conceptualisation and theoretical perspectives on the variables under
study, i.e. approaches to specifying Remco accountabilities and make-up, and perspectives on
professionalisation.
Remuneration
committees
403
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