The Church of England last night vowed to ‘turn the tide’ on a culture of lavish bonuses for bankers and business chiefs.
In an unprecedented attack on the City mindset, the Church, which represents some 25 million people in Britain, will use the significant financial firepower of its investments to vote against excessive pay packages.
It slammed the ‘culture of entitlement and greed’ in big businesses, saying it ‘rides roughshod’ over the Christian principles of justice and fairness.
The Church of England’s pension scheme has £8billion of investments – giving it a sizeable say in the practices of some of Britain’s biggest companies.
Its investments include RBS, Barclays, BP, Tesco, Shell and Vodafone, among other major UK firms.
Now two out of three companies it invests in face a ‘no’ vote on their pay, under a new 18-page pay policy published yesterday.
Written by the Church’s Ethical Investment Advisory Group (EIAG), it cites the teachings of the Old Testament, Jesus and Paul the Apostle as well as bringing in research from accountants Deloitte and PwC.
‘The key warning [from the Bible] is that “the love of money is the root of all evil”,’ it said.
‘Jesus issues a stark warning that you cannot serve both God and mammon, which is translated as wealth or materialism’.
It added: ‘Yet Jesus does not count equality with God something to be clung on to, but rather he empties himself to humiliation and crucifixion.’
More...
The celebrities' barrister, the Leveson QC's glamorous No2 and an affair that triggers doubts over the Inquiry's integrity
Metro drive-thru branches to be launched in next month - but would you bank through your car window?
'King of Marbella' gangster who spent fraud money on £2m farmhouse, fast cars and a yacht is facing jail
The change of policy comes under the leadership of the new Archbishop of Canterbury, Justin Welby – a former businessman who has been praised for his scrutiny of banking bosses while on Parliament’s banking standards commission.
The document warns that large bonuses ‘have come to be regarded as an entitlement’ across the City.
Of the FTSE 100, the index of Britain’s biggest firms, fewer than ten withheld bonuses from top executives last year, it said.
‘Businesses cannot contribute, to their full potential, to a good society and human flourishing if they have no regard for the society in which they operate,’ it added.
It also slammed tax-dodging by companies as ‘unethical’.
Every year shareholders of public companies are allowed to vote on the pay and rewards of directors.
The Church of England has sizeable assets in big companies including Barclays - and is warning against a culture of greed
The Church, which uses a host of City firms to run its investments but takes control of its own voting rights, is using its voting platform to campaign to stop boardroom excess.
‘We want to reflect the Church’s views when voting,’ said Edward Mason from the EIAG, one of the key authors of the new policy.
‘There is way too much short termism in these bonuses,’ he added.
The new policies include voting against any executive who gets more than a year’s worth of pay as a bonus, unless there has been ‘extraordinary results through exceptional performance’.
It also called on companies to claw back past bonuses from bosses who have not acted in the long term interests of the company or society.
It added that ‘ethical business conduct such as tax, bribery and treating customers fairly’ should also be taken into account.
Mr Mason, who is responsible for deciding which pay reports to vote down, said he hasn’t voted to support any bank pay in the past two years.
With a background in ethical investment policy, and training in corporate governance, he oversees the voting stances on various companies.
Last year he travelled to the annual meeting of News Corp investors to protest over the company’s ethical standards.
The Church has since pulled its funds out of the group – the final act if it believes companies are not listening to the concerns of shareholders.
Through its investments the Church holds shares in more than 2,000 UK firms – but does not have to attend every meeting to vote on a company’s pay.
These shareholdings will help fund its pension schemes, as well as investing money from its donations and gifts.
‘We also want just pay to apply to everyone including the lowest paid,’ he added.
The Church has called on company pay clerks to change the way that top bosses are incentivised.
Currently many receive rewards from performance over a three-year period.
But this is too short, the Church said, and should be more-than-doubled to seven years.
‘If a business is run for short-term profit, it may appear to make sense to put the interests of the company above those of society,’ it said.
‘But if a business is run for long-term profit, it is clear that the company can only prosper by serving the society in which it operates.’
It added: ‘Harm caused to society will catch up with it.’