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While shareholders are focusing on executive compensation, they aren’t promoting fair pay and decent work throughout their companies, according to a new report by the Shareholder Association for Research and Education.

“Investors have promoted the idea that a well-designed compensation structure will help incentivize executives to deliver improved company performance,” said Kevin Thomas, executive director of SHARE, in a press release. “We haven’t come to grips with how to recognize and incentivize the contribution the rest of the workforce makes to company performance. If effective compensation is important to attract, retain and incentivize performance for top executives, isn’t that also true for the rest of your employees?”

Read: 82% of global employers planning to review pay equity, gender pay: survey

The report outlines a range of options for bringing workforce compensation into the discussion, including:

  • Limiting the practice of benchmarking pay to inappropriate comparator companies;
  • Elevating oversight of workforce compensation to the board level;
  • Adopting ‘fair pay’ principles for the company as a whole;
  • Commissioning assessments of pay levels throughout the company’s workforce when determining executive pay;
  • Voting for shareholder proposals that enhance workplace rights like freedom of association; and
  • Reporting on decent work practices through instruments like the global workforce disclosure initiative.

Read: Companies emphasizing variable pay as salaries projected to rise by 2.8% in 2018: survey

“During the decade in which Canadian shareholders have participated in ‘say-on-pay’ votes, executive compensation has reached new heights, while workers’ wages have stagnated,” said Thomas. “This growing pay disparity should be a concern for investors.

“Even investors that are concerned about growing inequality tend to focus on limiting executive compensation as a remedy. In part this is practical, because thanks to ‘say on pay’ votes shareholders have the ability to influence executive pay. In part it is because investors also tend to stay out of operational concerns beyond the board and executive level. And in part it is a natural reaction to reports of egregious pay scales and practices at some companies.

“But capping executive pay on its own is a limited response to a structural problem. Limiting a few peoples’ income at the top end does not guarantee that the dollars saved will be channelled towards measures that improve economic outcomes for the rest of the workforce.”

Read: 20% of employers link pay to performance

Copyright © 2019 Transcontinental Media G.P. Originally published on benefitscanada.com

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