Cameron vows to get tough on executive pay
David Cameron has given a strong indication that he will act to curb high levels of executive pay.
Since the New Year both Mr Cameron, and the Deputy Prime Minister Nick Clegg, have made repeated calls to curb the excesses of executive pay.
The issue is seen as one of the most important to the British electorate and the government believes that taking action now will give them kudos in the eyes of the electorate.
Since the credit crunch executive pay for leaders of the top companies has expanded far faster than an increase in share prices for the majority of those same companies. This led to criticism that pay for the top bosses in the UK is not commensurate with performance.
Measures being considered are to allow shareholders to have binding votes on executive pay and to publish in simplified form how much top executives earn. There will also be reforms aimed at allowing shareholders to have a veto on remuneration deals handed out to executives who leave jobs in which they have failed.
The current rules allow shareholders an advisory but non-binding vote on pay. The Business Secretary, Vince Cable will publish the results of a consultation on bosses’ pay later this month.
Vince cable is also likely to recommend that employees sit on remuneration committees, something that is not popular amongst FTSE 100 top brass.
Mr Cameron said in an interview with The Sunday Telegraph: "We've got to deal with the merry-go-round where there's too many cases of remuneration committee members sitting on each others boards, patting each other's backs, and handing out each other's pay rises.”
In the last three months many leading business groups and not just those on the left wing of political views have recommended changes to executive pay. During 2011 the pay for top FTSE 100 bosses increased by more than 40 per cent at a time when average share prices have been falling and the average pay for normal workers rose by less than half the average rate of inflation throughout the year.
The CBI released a report at the end of November that recommends high levels of executive pay must be linked to performance. The Institute of Directors (IOD) went even further in its criticism in November, attacking executive pay levels as “unsustainable” saying that the “legitimacy of UK business in the wider society is significantly damaged.”
Meanwhile new date out from the Institute of Public Policy Research (IPPR) reveals that chief executives in 87 of the FTSE 100 companies received an average of £5.1 million in pay, bonuses, shares and pension contributions in the 2010-11 financial year, an increase of 33 per cent in one year despite the average increase in the value of the companies they work for only rising by 24 per cent.
The High Pay Commission conducted an inquiry that found that the pay of top executives at FTSE companies had risen by more than 4,000 per cent on average in the last 30 years.
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