Vince Cable announces government plans on executive pay
The Business Secretary Vince Cable has announced plans aimed at amending executive pay.
In a parliamentary speech to MPs Mr Cable outlined how company shareholders will be given powers to block excessive pay packages and that the remuneration of chief executives will be presented as just one figure and high salaries will need to be justified in remuneration reports. The salaries of all directors will be required to be published.
Companies will now be required to explain the pay of executives in relation to the pay of other types of employees. Shareholders will now have a binding vote on executive pay. A further initiative is that companies will be able to get back bonuses if it turns out that they were not justified by the financial performance of the company.
Firms will be encouraged to diversify the people who sit on their boards, though this will be a voluntary non-binding step for companies.
The Labour party made an intervention so that Mr Cable had to present the announcements a day earlier than planned. Shadow business secretary Chuka Umunna was granted permission by the speaker John Bercow to table a motion on pay so that the government would have to answer questions on the proposals.
Mr Cable delivered his speech saying that there was a “disconnection between top pay and company performance and that the government was attempting “to address what is a clear market failure.”
Mr Cable said that the effectiveness of the changes would depend on both companies and shareholders taking more responsibility.
He laid out plans for companies to deliver pay details in two parts; firstly outlining future remuneration plans and secondly detailing how pay policy had been implemented in the current year. He stopped short of insisting that firms must publish the ratios between the pay of the highest paid employees with that of the company average, a reform that Labour backs.
Mr Umunna said the government had not gone far enough in its proposals and that Labour would ensure that low paid employees were given a position on remuneration committees.
Mr Umunna said: "Employees play this type of role in Europe's strongest economy Germany and on the board of one of our most successful businesses John Lewis."
Mr Cable faced criticism from Labour backbenchers who said that the proposals did not provide solutions to all of the problems around executive pay. He was also criticised by Conservative backbenchers who said that his proposals would not encourage growth and provided more unwelcome regulation for UK companies.
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