The economic fallout from the Covid-19 pandemic has crystallised the need for a prudent and restrained approach by companies to corporate pay.
Chief executives and remuneration committees tabling irresponsible pay packages can expect a withdrawal of support from investors, even up to re-election of the chairman in extreme cases.
Any pain should start at the top. Pay cuts should affect senior management first; whether that means a cancellation or reduction of bonuses, lower future share awards, or even a temporary suspension of salaries.
Those measures should come before any scrutiny or decisions about longer-term, wide-scale, redundancies or restructurings.
There must also be a greater appreciation of the importance of employees and the supplier ecosystem. Shareholders and executives need to reflect on how to properly recognise the value generated at different levels of a company.
Senior leaders are important, but not the exclusive factor in the delivery of an organisation's success. This will inevitably reopen conversations about the appropriate pay ratio between senior executives and average employees.
FTSE 100 bosses on average are paid more than 110 times their average workers, which looks increasingly indefensible.
Although the right number will vary by company and sector, the overall number has to fall. In future, CEOs should not get bumper pay rises just because they are proportionately in line with average workforce increases.
A rise of 5% on a £20,000 salary is very different compared to the absolute increase in pay that would be enjoyed by the CEO. This is a simple place to start tackling the disparities.
Throughout the pandemic, it has been important for companies to preserve capital and protect the strength of their franchise.
Pressure will continue on the path to recovery, but companies should avoid rash decisions about redundancies or cutting investment because potential growth opportunities in 2021 and beyond are more important than short-term profits.
Responsibility means making cuts in an appropriate manner, not necessarily avoiding them altogether. It could mean postponing cuts until the economy is open, when employees stand a better chance of finding other jobs or ensuring equal treatment of employees from different backgrounds or levels of seniority.
Areas of concern in coming quarters
What are the red flags to look out for in the coming quarters? It would be concerning if a company is unable to provide guidance to the market but maintains internal opaque measures of success that trigger significant payouts.
That would cast doubts on the framework being used to evaluate and reward management.
The volume of shares being granted as part of annual incentive programmes is also an under-appreciated concern.
Several executives were granted future vesting share awards at the height of market volatility and at low points in the market.
To maintain the same value of awards relative to salary, many executives received a substantive increase in the number of shares compared to previous years.
With the FTSE 100 and other indices around the world up more than 25% from year-lows, executives are potentially in line for bumper windfalls - far exceeding the value of any salary and bonuses forgone.
This is a particular issue in the US. As an example, the CEO of a sporting goods business gave up a $1m salary, but in return received a whopping share award that has delivered $2m in potential gains in just three months.
Factor in the three- to five-year period of share price recovery after which the awards will ultimately vest, and the problem is compounded.
We have voted against more than 40% of pay packages over the past five years and will continue to withhold support from proposals that deliver excessive and unjustified pay.
Increasingly, we vote against pay proposals and the individuals that make them, typically members of the remuneration committee.
It is time for the entire industry to use its voice and vote in a tougher manner.
Mirza Baig is global head of governance at Aviva investors