EMPLOYERS’ organisation the CBI today called for executive pay to match performance.

It said action was needed to boost the link between directors’ pay and performance to strengthen the current system of corporate governance.

Responding to the Government’s discussion paper on executive remuneration, the CBI also insisted there should be no rewards for failure and it outlined several areas where the remuneration process and the level of transparency could be strengthened.

It urges greater transparency on criteria used to set rewards; executive pay should be considered as part of a broader organisation-wide pay strategy; and suggests withholding performance-related pay in cases of poor performance. CBI chief policy director Katja Hall said: “High pay is only ever justified by outstanding performance.

“The current system of corporate governance is a robust mechanism when it’s applied consistently and effectively, and there are ways it could be strengthened further.

“We believe remuneration committees should be bolstered by widening the pool of non-executive directors on them and giving them greater scope to reduce or withhold rewards in cases of poor performance.”

The CBI’s comments follow last week’s Institute of Directors response to the discussion paper which said current increases were “unsustainable”, adding: “The legitimacy of UK business in the eyes of wider society is significantly damaged by pay packages that are not clearly linked to company performance.”