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Clamping down on excessive executive pay

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Barclays and Aviva are two high-profile companies that have recently made the headlines because of shareholder revolts over excessive executive pay. Especially at a time of recession, this trend is simply not sustainable for our economy.

Real questions over executive pay have really only entered the public and shareholder consciousness in more recent years, but the very nature of the revolts currently occurring threaten to cause widespread economic instability and an unrelenting slump.

One of the first national cases of this ilk involved former M&S chief executive Sir Stuart Rose, who in 2009 pocketed a cushy £4.3m in pay and bonuses—a 140% increase on his previous year’s income—despite the organisation’s revenue rising by just 5% to £632m in the same year.

But in the last few weeks, Barclays and Aviva both hit the headlines after witnessing shareholder uprisings because of the disproportionate pay-packets of their executives.

Shareholders have begun to throw their weight around in major companies, and the fallout of the Aviva case study in particular saw chief executive Andrew Moss forced into resignation.

According to shareholders, Moss’ position had become untenable, particularly given that Aviva, as an institutional investor, had voted against excessive executive pay at Trinity Mirror, whose own chief executive Sly Bailey has received similar flak.

Shareholders have lost patience with companies that have underperformed and are still paying out a lot of money”, says Tom Powdrill, head of communications at corporate governance advisory firm, PIRC.

The political pressure is a new thing, and has certainly been really strong in the last couple of years.

As a result, there must be, because of the voting outcomes [54% of Aviva shareholders voted against the company’s executive pay policies], some institutions out there that have basically decided that they need to toughen up their approach for whatever reasons.

That combination of factors just hasn’t been there before.”

In 2010, an independent inquiry was launched to tackle the issue of executive pay. Chaired by Deborah Hargreaves, formerly of The Guardian and The Financial Times, the yearlong investigation, called the High Pay Commission, spawned the formation of the High Pay Centre, of which Hargreaves is director.

When we had rising house prices and a fairly benign economic climate, people were more relaxed about big pay awards, but I think since the financial crisis, that’s changed”, she told Blue & Green Tomorrow.

There has been increasing public anger, but also shareholders have begun to realise that they’ve been short-changed by these companies, where they’ve paid ever-increasing amounts of money to the top managers, and yet they themselves have not seen their returns increased and their dividend has been stagnant.

The share prices have gone down, so shareholders have been losing out and have not really been getting what they paid for.”

The Aviva remuneration report vote speaks for itself. A percentage of shareholders nine times larger than the British average opposed the company’s executive pay policies; Barclays suffered a similar fate.

A total of 26.9% of shareholders were against its executive pay package, whilst a further 21% voted against the re-election of Alison Carnwath, the remuneration committee chairman who is incidentally still in a job.

Paying boardroom executives millions of pounds in bonuses and increasing their pay dramatically year-on-year despite the company’s overall financial situation being stagnant or declining is simply unsustainable.

I think it’s particularly contentious because of the economic climate that we’re in”, Hargreaves adds.

When you’re seeing people getting very minimal pay rises or pay freezes, and in some cases pay cuts, or people getting made redundant and slipping down the income ladder, I think it then becomes a big public debate.

The feeling is that there is a great deal of unfairness in the way people at the top are awarded, and I think it’s quite hard for the general public to understand the justifications...”

Powdrill of PIRC, which was founded in 1986 and stands for Pensions and Investment Research Consultants, adds that there were three drivers behind the latest wave of executive pay protests from shareholders.

Partly, it is the reality that shareholders seem to get more interested in governance issues and are more exercised about remuneration where the performance of companies isn’t great”, he says.

Secondly, since the financial crisis in the UK, there has been a fairly common thread, which has continued despite a change in government, that shareholders need to be more active on governance issues more generally.

Then thirdly, there is the wider, public debate about executive pay. It’s certainly caught popular imagination again.”

So what is the solution? Clearly, whilst executive pay disputes continue to hog national headlines, more shareholders are going to speak up and make their voice heard within other major companies.

In Australia, they have a “two strikes” system, under which company directors are forced into re-election if more than 25% of shareholders vote against the remuneration report for two consecutive years.

Whilst this procedure might not work in the UK—Powdrill says the Australian system is “a bit complicated”—something of a similar type is required to put an end to the worrying trend.

Business secretary Vince Cable has previously outlined solutions, such as giving shareholders a binding vote on pay, but this in itself, if implemented wrongly, could cause even greater problems for companies.

Even without legislation on unjustly excessive pay-packets, the High Pay Centre’s Hargreaves thinks that in some ways, companies will naturally realise that this isn’t a sustainable path to follow.

There is this erosion of public trust in companies, and companies are even thinking that it might affect their license to operate in the UK”, she says.

Once that starts to happen, it’s a very worrying trend, because we need these companies to lead us out of recession.

We can’t have a situation where the public thinks they’re all ripping us off, so I do think companies are looking at this in more detail.

They’re not all taking any action and some of them don’t see the need to, but I do think there is a realisation that one thing needs to change, and it will change in the next couple of years.”

Let the cases of Barclays and Aviva be a lesson to all major companies around the world. As shareholders become increasingly vocal, paying executives irrational sums of money during mediocre or even loss-making financial times will become a thing of the past.

Despite this, Blue & Green Tomorrow encourages shareholders and investors to support companies that are concerned about the issue right now.

More businesses with these ethics will reap equality in our economy. And with an equal economy comes sustainability – the key to a blue and green tomorrow.

Further reading:

Aviva shareholders speak out on executive pay

Barclays under fire… again

Performance vs. pay: should boardroom officials be rewarded regardless of their company’s success?

Features

Ways Green Preppers Are Trying to Protect their Privacy

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Environmental activists are not given the admiration that they deserve. A recent poll by Gallup found that a whopping 32% of Americans still doubt the existence of global warming. The government’s attitude is even worse.

Many global warming activists and green preppers have raised the alarm bell on climate change over the past few years. Government officials have taken notice and begun tracking their activity online. Even former National Guard officers have admitted that green preppers and climate activists are being targeted for terrorist watchlists.

Of course, the extent of their surveillance depends on the context of activism. People that make benign claims about climate change are unlikely to end up on a watchlist, although it is possible if they make allusions to their disdain of the government. However, even the most pacifistic and well intentioned environmental activists may unwittingly trigger some algorithm and be on the wrong side of a criminal investigation.

How could something like this happen? Here are some possibilities:

  • They could share a post on social media from a climate extremist group or another individual on the climate watchlist.
  • They could overly politicize their social media content, such as being highly critical of the president.
  • They could use figures of speech that may be misinterpreted as threats.
  • They might praise the goals of a climate change extremist organization that as previously resorted to violence, even if they don’t condone the actual means.

Preppers and environmental activists must do everything in their power to protect their privacy. Failing to do so could cost them their reputation, future career opportunities or even their freedom. Here are some ways that they are contacting themselves.

Living Off the Grid and Only Venturing to Civilization for Online Use

The more digital footprints you leave behind, the greater attention you draw. People that hold controversial views on environmentalism or doomsday prepping must minimize their digital paper trail.

Living off the grid is probably the best way to protect your privacy. You can make occasional trips to town to use the Wi-Fi and stock up on supplies.

Know the Surveillance Policies of Public Wi-Fi Providers

Using Wi-Fi away from your home can be a good way to protect your privacy.However, choosing the right public Wi-Fi providers is going to be very important.

Keep in mind that some corporate coffee shops such a Starbucks can store tapes for up to 60 days. Mom and pop businesses don’t have the technology nor the interest to store them that long. They generally store tips for only 24 hours and delete them afterwards. This gives you a good window of opportunity to post your thoughts on climate change without being detected.

Always use a VPN with a No Logging Policy

Using a VPN is one of the best ways to protect your online privacy. However, some of these providers do a much better job than others. What is a VPN and what should you look for when choosing one? Here are some things to look for when making a selection:

  • Make sure they are based in a country that has strict laws on protecting user privacy. VPNs that are based out of Switzerland, Panama for the British Virgin Islands are always good bets.
  • Look for VPN that has a strict no logging policy. Some VPNs will actually track the websites that you visit, which almost entirely defeats the purpose. Most obviously much better than this, but many also track Your connections and logging data. You want to use a VPN that doesn’t keep any logs at all.
  • Try to choose a VPN that has an Internet kill switch. This means that all content will stop serving if your VPN connection drops, which prevents your personal data from leaking out of the VPN tunnel.

You will be much safer if you use a high-quality VPN consistently, especially if you have controversial views on climate related issues or doomsday prepping.

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Features

How Going Green Can Save Your Business Thousands

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Running a company isn’t easy. From reporting wages in an efficient way to meeting deadlines and targets, there’s always something to think about – with green business ideas giving entrepreneurs something extra to ponder. While environmental issues may not be at the forefront of your mind right now, it could save your business thousands, so let’s delve deeper into this issue.

Small waste adds up over time

A computer left on overnight might not seem like the end of the world, right? Sure, it’s a rather minor issue compared to losing a client or being refused a loan – but small waste adds up over time. Conserving energy is an effective money saver, so to hold onto that hard-earned cash, try to:

  • Turn all electrical gadgets off at the socket rather than leaving them on standby as the latter can crank up your energy bill without you even realizing.
  • Switch all lights off when you exit a room and try switching to halogen incandescent light bulbs, compact fluorescent lamps or light emitting diodes as these can use up to 80 per cent less energy than traditional incandescent and are therefore more efficient.
  • Replace outdated appliances with their greener counterparts. Energy Star appliances have labels which help you to understand their energy requirements over time.
  • Draught-proof your premises as sealing up leaks could slash your energy bills by 30 per cent.

Going electronic has significant benefits

If you don’t want to be buried under a mountain of paperwork, why not opt for digital documents instead of printing everything out? Not only will this save a lot of money on paper and ink but it will also conserve energy and help protect the planet. You may even be entitled to one of the many tax breaks and grants issued to organizations committed to achieving their environmental goals. This is particularly good news for start-ups with limited funds as the Environment Protection Agency (EPA) is keen to support companies opening up their company in a green manner.

Of course, if you’re used to handing out brochures and leaflets at every company meeting or printing out newsletters whenever you get the chance, going electronic may be a challenge – but here are some things you can try:

  • Using PowerPoint presentations not printouts
  • Communicating via instant messenger apps or email
  • Using financial software to manage your books
  • Downloading accounting software to keep track of figures
  • Arranging digital feedback and review forms
  • Making the most of Google Docs

Going green can help you to make money too

Going green and environmental stability is big news at the moment with many companies doing their bit for the environment. While implementing eco-friendly strategies will certainly save you money, reducing your carbon footprint could also make you a few bucks too. How? Well, consumers care about what brands are doing more than ever before, with many deliberately siding with those who are implementing green policies. Essentially, doing your bit for the environment is a PR dream as it allows you to talk about what everyone wants to hear.

Going green can certainly save your money but it should also improve your reputation too and give you a platform to promote your business.

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