In the wake of the controversy surrounding the Royal Bank of Scotland’s (RBS) chief executive Stephen Hester’s bonus questions have been raised about the role HR plays in setting pay and reward for senior employees.
Duncan Brown, a principal at Aon Hewitt, said the independent governance structure of organisations means the knowledge of HR professionals is to some extent marginalised when it comes to deciding on executive pay.
He said: “Organisations have got very independent remcos [remuneration committees] that may use very separate advisers to what the organisations uses for its reward advice, so they are divorced from the rest of the organisation.
“That is great for independence, but when you then start considering internal relativities and effects you [have] a problem, and that is how, quite frankly, there were some quite ridiculous decisions where bonuses were awarded to executives when they were not awarded to other staff.”
Brown argued that HR professionals should ensure remuneration committees are made aware of the wider business context their decisions on executive pay are being made in.
“It is important that remcos do not just consider the market data. There is a question of how to restructure pay in a sector. If you talk to most HR directors in financial services companies, in my experience,they all say ‘I do not like what is going on’,” he said.
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