Regulatory changes are starting to drive culture change on executive pay – EY

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Mark Shelton, EY’s head of executive compensation & reward, comments in advance of a speech the Business Secretary Vince Cable will be making this evening on corporate pay:

“Companies are making progress in improving the link between pay and performance, particularly in the FTSE 100. But while responsible executive reward decisions must be in the context of performance, they also need to consider talent market issues to ensure they attract, retain and incentivise critical talent.

“The most effective pay and performance packages don’t just reward the prior year’s business performance. Instead they are designed to support the business strategy and drive growth, by attracting, retaining and incentivising the right talent to drive both the financial and non-financial performance of the company. The delivery of financial results needs to be linked to ‘how’ it is going to be achieved. That includes the strategy, behaviours, risks and culture of the firm.

“The regulatory changes are starting to have a positive impact in driving this culture change. Firms and committees are making strides towards putting sustainable shareholder value at the forefront of their decisions. But there’s clearly more work still to be done.”