What is the ethical issue?

Executive remuneration or pay is composed of the financial compensation and other awards received by a senior member from their company’s Board for their service and performance.

Executive remuneration is an important driver of behaviour and therefore of the way values are perceived throughout a company. Current approaches in the UK to how executive pay is set are very complicated, with outcomes that are uncertain and a process that is tough for boards to manage.

Executive pay can face substantial public scrutiny, with pay packages making headlines and receiving backlash for appearing ‘excessive’ or ‘lavish’. IBE research consistently reveals executive pay to be one of the most significant business ethics issues which the British public feel businesses need to address.

If an organisation is seen to continually offer increases in executive pay, against a backdrop of pay disparities, it can erode trust in the business, and have a negative impact on employee morale and the company's reputation.

 

IBE Guidance

A summary of good practice
  • Evaluating and compensating performance on the basis of how objectives are met, as well as what is delivered, is vital. Outlining clear and balanced pay structures, and following these, should mitigate accusations of ‘excess’ for executive employees.
  • Remuneration committees must have a clear sense of the value of what is being awarded, and they need to do more to justify the amount they have set for executives. In recent years, there have been growing efforts to improve transparency in the boardroom and taking into account the pay and conditions of the average employee when setting executive pay.

 

Further resources

Publication type: Business ethics briefing

Business Ethics in the News 2019

This briefing provides an overview of the ethical concerns and lapses that were recorded by the IBE in its monitoring of media coverage in 2019. It gives an overview of which sectors and issues related to business ethics were most covered in the news. For 2019, we have recorded a total of 361 different stories involving lapses of companies with a UK presence.

29 January 2020

Publication type: Survey

Attitudes of the British Public to Business Ethics: 2019

The 2019 results of the IBE's annual survey of the attitudes of the British public to business ethics.

17 December 2019

Publication type: Other

A Year In Review: Ethical Concerns and Lapses 2018

Read the IBE's annual analysis of business ethics news stories from the last year - which were the sectors and issues most in the news in 2018?

30 January 2019

Publication type: Survey

Attitudes of the British Public to Business Ethics: 2018

The 2018 results of the IBE's annual survey of the attitudes of the British public to business ethics

13 December 2018

Publication type: Survey

Attitudes of the British Public to Business Ethics: 2017

The 2017 results of the IBE's annual survey of the attitudes of the British public to business ethics

12 December 2017

Publication type: Board briefing

Fair or Unfair: getting to grips with executive pay

This Board Briefing offers both practical advice on how remuneration committees can address the challenge and some pointers to possible reform centered around the need to be clear about the value of what is being awarded and the pace at which remuneration is earned. Fairness and simplicity are the two themes which run through this publication.

10 February 2016

Publication type: Research report

Fairness in the workplace: Staffing and employment contracts

This IBE Briefing considers ethical issues related to staffing arrangements and employment contracts. Specifically, it looks at the potential ethical implications of the ‘casualisation’ of the workplace, including zero hours, agency contracts, part-time workers and transfers under TUPE.

30 April 2015

Publication type: Research report

Fairness in the Workplace: Pay

This Briefing looks at how fairness can be achieved in the specific areas of executive remuneration and paying a living wage. It also briefly addresses some additional pay issues, and provides examples of ways in which some companies are addressing the issue of fairness in pay.

02 July 2014

Publication type: Business ethics briefing

Supply Chain and Payment Practices

This briefing explores the three issues involving supplier payments. It then looks at governmental attempts to curb the problems and how companies are addressing the issue.

06 November 2013

Publication type: Research report

Incentivising Ethical Behaviour in Staff

This Briefing analyses the different ways of incentivising ethical behaviour, using ‘carrots’ or ‘sticks’. It outlines 6 attributes of an effective incentives scheme.

11 September 2009