Bridging Theory and Practice: Ethical Governance of Executive Compensation in the Financial Times Stock Exchange 100

Abstract

This paper analyzes the ethics of executive compensation governance in large UK publicly quoted companies. It combines content analysis of Financial Times Stock Exchange 100 (FTSE-100) remuneration committee reports with interviews with key decision-makers. A framework from business ethics and corporate governance literature helps understand the factors shaping this governance. Maintaining public trust requires aligning with societal norms and regulatory compliance. Findings indicate growing awareness of ethical considerations among decision-makers and highlight the need for a more holistic, values-based approach that strengthens stakeholder inclusivity. Interviews with decision-makers reveal challenges in translating ethical principles into practice. Governance mechanisms intended to align executive and shareholder interests face limitations, and perceived unfairness in executive rewards persists. This paper applies theory to analyse the interplay of external and internal factors shaping executive compensation governance, develops practical recommendations for enhancing its effectiveness and integrity, and provides a heat map tool to compare organisations’ ethical principles.