Controlling Executive Pay: Institutional Investors or Distributive Justice?

As austerity measures initiated in many countries start to take effect, resentment of the fat cat culture that prevails in the corporate world is likely to deepen. Many employees are losing their jobs or taking pay cuts or freezes, their pension savings are diminishing and people are suffering home repossessions. At the same time, CEOs and investment bankers reportedly continue to receive enormous salaries and bonuses. This paper explores the role of institutional investors in the regulation of executive compensation. It asks why they have failed to fulfil this role adequately. On the basis of their failures and the dangers that such remuneration practices might pose for social stability, I seek to offer an alternative proposal for setting and monitoring executive pay. That alternative appeals to a model of substantive and procedural distributive justice based on deliberation with a broader body of participants.