A retrospective on the Greenbury provisions Michael James Price 109267573 Newcastle University Business School A thesis submitted to the Faculty of Humanities and Social Sciences at the University of Newcastle upon Tyne for the degree of Doctor of Philosophy. January 2016. Abstract This thesis analyses corporate governance and executive remuneration in the UK during a period of precipitous change between 1992 and 2012. The study undertakes a mixed methods mode of enquiry to investigate the drivers and patterns of changes in corporate governance and executive remuneration. This thesis employs Bourdieusian perspectives on power, capital and fields, to illustrate those in society who operate in the field of power, harness observable forms of capital to cultivate policies which regenerate and support the elite body, which they are conceivably members of. The empirical setting for the analysis focuses on the 1995 Greenbury Committee, who played a central role in constructing the current framework for remuneration policy in UK organisations. Theoretically, this study propagates the idea of closure, as a specific mechanism in the field of power, whereby multiple elite groups come together, to address issues of mutual significance and thereby subvert threats to their collective authority. Using empirical data, the study questions normative interpretations of key concepts, such as merit, accountability and transparency, upon which much corporate governance regulation and remuneration decisions are predicated. Finally, the research reports on a de facto change from a unitary board structure, to a two tier system, structurally more akin to a German model of governance. The research finds that the Greenbury provisions failed in their stated objective, of linking pay with performance. This research also demonstrates that the construction of the Greenbury committee itself, was essentially a political response by the governing elite to address the ephemeral problem of executive remuneration and can, accordingly, be conceived of as an example of a form of quasi-political self-regulation. i Acknowledgements First and foremost I would like to thank my supervisors, Professor David Campbell and Professor Charles Harvey for their support and guidance throughout. Without David’s encouragement and direction I would not have been able to undertake this work. His assistance in helping me collect the data was invaluable and his input and patience over the last few years is something I will forever be grateful for. Additionally, Charles’ scholarly guidance, drawn from a lifetime of experience, helped to develop sections of this thesis to a level which would not have been possible otherwise. I would also like to thank Christine Stevens who manages the ‘research reserve’ at Newcastle University for cataloguing our collection of annual reports. Without the many hours of work she put into organising these reports I would have found it much more difficult to collect the data. Finally I would like to thank my wife, without her support, encouragement and understanding I would not have been afforded the opportunity to complete this work. ii Abstract .................................................................................................................................................... i Acknowledgements .................................................................................................................................. ii Table of Figures ...................................................................................................................................... vii Abbreviations used in the thesis .............................................................................................................. ix Chapter 1 – General Introduction ............................................................................................................ 1 1.1 Corporate governance and executive remuneration: an introduction. .......................... 1 1.1.1 An introduction to remuneration and inequality .................................................................... 3 1.1.2 Inequality in the UK: why remuneration matters .................................................................. 5 1.2 Executive remuneration: the need for further research ...................................................... 8 1.2.1 Short termism and remuneration in the UK: an introduction ................................................ 9 1.3 Ownership: an introduction .............................................................................................. 13 1.4 Aims, contributions and research questions ...................................................................... 16 1.4.1 The structure of the thesis .................................................................................................... 17 Chapter 2 – Corporate governance and executive remuneration: A literature review ........................... 19 2.1 Introduction ...................................................................................................................... 19 2.2 Corporate governance theory and practice. ...................................................................... 20 2.2.1 Agency theory ..................................................................................................................... 20 2.2.2 Managerial hegemony theory .............................................................................................. 22 2.2.3 Accountability ..................................................................................................................... 25 2.2.4 Transparency ....................................................................................................................... 27 2.3 Inequality: why remuneration matters ............................................................................. 30 2.3.1 Social systems and corporate governance ........................................................................... 33 2.4 The changing model of ownership: new finance capitalism and financialization.............. 34 2.4.1 Asset management ............................................................................................................... 37 2.5 Remuneration committees ................................................................................................. 40 2.5.1 Engagement with remuneration committees ....................................................................... 42 2.6 Remuneration, performance and incentives: a review ...................................................... 43 2.6.1 Performance-related pay ...................................................................................................... 44 2.6.2 Instruments of executive reward: Long term incentive plans (LTIPs) and options. ............ 47 2.6.3 Marginal productivity .......................................................................................................... 48 2.7 Bourdieusian perspectives on power, governance and remuneration ............................... 50 2.7.1 Field theory and habitus ...................................................................................................... 51 2.7.2 Capital ................................................................................................................................. 53 2.7.3 Power ................................................................................................................................... 55 2.7.4 Social structure, education and goverance .......................................................................... 57 iii 2.8 Elites, class and dominant corporate agents in the UK ..................................................... 61 2.9 Institutional reform, corporate governance and the field of power ................................... 65 2.10 Conclusion ....................................................................................................................... 70 Chapter 3. Methodology ......................................................................................................................... 71 3.1 Introduction ....................................................................................................................... 71 3.2 Research design ................................................................................................................. 71 3.3 Overall approach and epistemological positioning ............................................................ 74 3.3.1 The critical sociology of Pierre Bourdieu ............................................................................ 77 3.4 Data sources and methods of collection ............................................................................. 79 3.4.1 The data set .......................................................................................................................... 79 3.4.2 Definitions ............................................................................................................................ 81 3.5 Corporate governance texts as a collective discourse ........................................................ 84 3.6 Data analysis ...................................................................................................................... 87 3.7 Interviews .......................................................................................................................... 89 3.7.1 Interviewing elites ...............................................................................................................