Hermes Investment Management calls for reform of CEO pay system

Hermes Investment Management is calling on companies to review, and overhaul, executive pay structures.

According to City AM, Hermes released a report detailing exactly why this move was necessary – explaining that restructuring remuneration practices helps a business in the long-term, whilst simultaneously allowing them to address the issue of fairness.

Hans-Christoph Hirt, Co-Head of Hermes EOS, Hermes Investment Management, commented to City AM: “The combination of simplicity with increased certainty of outcome should result in lower average pay-outs, without changing the value of the award in the minds of individual executives. Importantly, we believe pay packages should avoid incentivising unintended behaviour and encourage the creation of sustainable value for all stakeholders.”

The changes which were proposed included publishing the ratio of CEO pay compared to the average workers’ and a written note from a member of the Boardroom explaining why the CEO has been awarded their pay package that year.