Leader: Shareholders put down a marker

OF THE many examples of corporate pay excess, the planned share bonus award to Sir Bill Gammell of Cairn Energy could not be regarded as an outrageous case of reward for failure.

Here was no hired hand brought in to run an already- established company. Sir Bill founded Cairn. He played a major role in its growth and success, bringing enormous rewards to shareholders. And he had a direct involvement in securing the sale of the company’s Indian operations for £3.5 billion last year.

But that is what makes the successful intervention of institutional investors in securing a withdrawal of the award all the more salient as a potential breakthrough. In bringing pressure to bear to scrap a £2.5 million share award, institutional investors have made it all the more difficult for them not to act on those many cases where bonuses have considerably less justification and, indeed, where there has been effective reward for failure beneath the baffling formulae of executive-pay consultants. The behind-the-scenes pressure and consequent board retreat should work to encourage other interventions in the coming weeks and months.

Timid reforms by Vince Cable will not by themselves bring the curtain down on excessive pay and bonuses. Institutional shareholders need to be far more ready to act on their responsibilities and apply pressure before the vacuous procedural formalities of a sparsely-attended annual meeting. The achievement of a result here could mark a long-awaited tipping point in what has been until now an unequal struggle between the executive hired hands and the company owners.