This year the firm made another bold move, declaring that it would no longer charge investors for research costs on its flagship fund and would publish a full list of transaction costs. And now in another break with the asset management industry Woodford IM chief executive Craig Newman has announced it is scrapping all bonus payments to staff to discourage short-term decision making. Instead staff will receive higher base salaries.
Executive remuneration is one of those lumbering, intractable issues that push their way into the headlines every so often triggering fresh efforts to solve the problem of uncontrollable and excessively high pay packages. What riles critics are the spiralling amounts paid, seemingly regardless of performance, the fact that they are so much higher than the salaries of the average employee, that they rise faster than everyone else’s, not to mention inflation, (according to the High Pay Centre think-tank, rewards at the top grew by 10 per cent in 2015) and because bonus payouts, despite an increased use of deferral schemes, encourage short-termism and risk taking.
Bosses argue that they deserve their pay, that they need to be rewarded and motivated, and now they are routinely hired from outside the company, rather than internally, the measuring stick for pay levels has to be what their peers are paid, not average pay levels at their company.
Prime minister Theresa May has excessive boardroom pay in her sights - she wants to rid Britain of the "unhealthy and growing gap” between workers’ pay and bosses. So shareholder votes might be made binding rather than advisory. There could be consumer and employee representation on boards, pay multiples might have to be published, and the way bonuses are paid changed to better align the long term interest of the company and its shareholders. But long term incentive plans are already in place at most FTSE companies and as Paul Jackson regularly points out in these pages, arranging pay packages that are effective and judged to be fair by all parties remains far from an easy thing to achieve.
If shareholders are given what one US senator called "the ability to apply the emergency brakes the next time the company management appears to be heading off a cliff” when it comes to pay deals, it might make little difference. For some shareholders, as long as performance is good, sky high pay deals are fine – shareholders tend to turn up at AGMs carrying well-thumbed Reports & Accounts, not pitchforks. Only 33 per cent of shareholders voted down WPP chief executive Sir Martin Sorrell’s £70.4m pay deal in June. Admittedly it's a different matter when bosses mess things up and wipe billions off the share price.
Whatever the outcome of Mrs May's intervention, it will be a drawn out, complex battle. In the meantime, if you believe high pay harms rather than helps your returns, choose your shareholdings accordingly.
Rosie Carr is deputy editor of Investors Chronicle
