jUlia Hoggett has been a breath of fresh air as CEO of the London Stock Exchange for the past two years. A university-trained sociologist, she speaks as if she genuinely cares about the role of the exchange in the UK economy, a concern that is often hard to detect within the parent company’s obsession with global data and analytics products.
She is firmly in the new consensus that core elements of the UK government and shareholder protection regime must be dismantled to attract more companies to London, as the Financial Conduct Authority proposed this week (this column’s opinion : sadly, that pragmatic analysis may be correct). But she has also produced genuinely innovative ideas, such as a plan to create a share trading venue for privately owned companies as a springboard to a full listing on the UK market.
However, Hoggett’s latest free-thinking thoughts on how to boost the capital markets “ecosystem” deserve no applause. Bottom line: UK-based executives need a pay rise to stay loyal to London.
Okay, the analysis isn’t that straightforward, but the spirit of his call for “a constructive discussion” on boardroom rewards isn’t hard to decipher. “Often the same agency agencies and asset managers who oppose UK compensation levels back much higher compensation packages in different jurisdictions, especially the US,” Hoggett argues.
“This lack of a level playing field for UK businesses often goes undiscussed, or if it is discussed, the downside risks to our businesses, our economy and our competitiveness are not part of the conversation.”
You are obviously right that proxy voting agencies are hypocrites protesting, say, a £10m boardroom package in the UK while nodding to a $30m one at an equivalent company in the US. But, come on, the idea that executives of UK-listed companies should be bribed with more money or more stock incentives is nonsense.
FTSE 100 executives are not underpaid relative to their European peers, which is a more appropriate playing field for comparison. In terms of recruitment, the top end of the UK listed company scale is remarkably international. All who come are welcome, and have been coming for years.
Hoggett might consider the London Stock Exchange Group, the parent company of the FTSE 100, itself. She managed to hire as her chief executive David Schwimmer, an American who had been at Goldman Sachs, where they are not badly paid, for 20 years. Schwimmer has prepared to pull in £4.7m (2022) and £6.8m (2021) in the UK. Before him, there was a Frenchman, Xavier Rolet.
There are rare examples of FTSE 100 CEOs fleeing to the US unexpectedly. Laxman Narasimhan moved from Dettol’s Reckitt Benckiser firm to Durex to Starbucks last year. On the other side of the ledger, however, Pearson convinced his shareholders to agree to the hiring of former Disney executive Andy Bird in an American-style package with an extraordinary stock component; there was noise (Mickey Mouse rewards, etc.), but it passed.
The point is that a healthy stock market also requires its leading companies to loosely conform to local expectations for fair rewards. Not everyone can float in the mid-Atlantic without being accountable to anyone. Pay rates at many FTSE 100 companies are already well above what would have been acceptable 20 years ago.
Hoggett says he’s seeking input for a “big top” conversation about execution compensation. Here’s one: the boardroom salary in the UK is already too high. And, if the broader reform agenda on stock market rules and regulations comes to be seen as a back door way for UK executives to raise their pay, the outside world may conclude that it’s all a scam. Focus on renovations with broad appeal.