Companies should switch to a salary-only model for executive pay if they want to bring down the size of pay packages and reduce inequality.
Daniel Godfrey, a former of chief executive of the Investment Association and a co-founder of the The People’s Trust—a new investment trust launched this year, proposes that a significant amount of the salary would be offered in shares bought monthly at a market price and held on a deferred basis for at least seven years.
Godfrey said in the Financial Times: “This system would align incentives with long-term success. The fixed value of the shares purchased each month is not linked to performance, but the value of those shares in seven years or more when you can actually sell them absolutely is.
“This incentivises long-term behaviour by executives to invest in people and innovation, but also to protect the environment, communities and suppliers. It incentivises executives to genuinely care about succession planning and the long-term success of the company after they are gone.”