Up until 2007 the stock market was booming and most shareholders were happy to nod through sky-high pay packages for senior executives.
Since the 2008 crash fund managers have struggled to get good returns and small shareholders have watched their nest eggs shrink but executives continued to supersize their pay.
The surprise is not that shareholders are revolting now but that it has taken so long. The latest casualty of that revolt, Andrew Moss, has stepped down as chief executive of insurers Aviva after a majority of shareholders voted against the company's remuneration report. He follows Sly Bailey of Trinity Mirror and David Brennan of AstraZeneca. Others, including Bob Diamond of Barclays, have suffered bruising criticism for what are perceived as egregious reward packages while so many are struggling financially.
We have argued that it is time for a better balance between rewards to top executives and to shareholders. Binding shareholder votes on top pay, expected in today's Queen's Speech, is a welcome start and a tribute to the tenacity of Business Secretary Vince Cable. He has been aided by the rising tide of resentment against fat cat pay.
The main focus of protest has been against so-called reward for failure, rather than whopping pay. It is vital to tackle both.
A bonus should mean what it says. In general the bar has been set so low it is hard for senior executives not to clear it. Clawbacks are rare. Most beneficiaries are not genuine risk-takers but managers who often receive huge rewards for little more than "efficiency savings", or downsizing. Many have received disproportionate rewards while their company's share price has slumped. What if shareholders could vote on remuneration packages and severance terms when first negotiated?
Executive pay needs to be reformed not only because there are rewards for failure but also because there are hugely disproportionate rewards for success. Binding shareholder votes on remuneration reports is just a start. How can we encourage our best brains to go into teaching or medicine if they can earn 10 times more on the board of a bank? Obliging companies to state plainly the total reward package for top executives would bring a welcome transparency, as would a requirement to express top pay as a ratio of median pay. Institutional shareholders should disclose their voting records on these matters, so that clients can hold them to account. Remuneration boards, which are too often mutual back-scratching exercises, also need to be shaken up, with worker representatives to ask tough questions.
Shareholders seem to have woken up to their responsibilities but voting down absurd pay packages is only the start. When directors fail to perform, they should not be reappointed.
Our ISAs and pensions suffer when big companies are allowed to operate like cows milked for the benefit of their bosses.
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