Vince Cable Announces Plans To Curb Executive Pay
Vince Cable outlined plans for shareholders to veto executives' high pay on Monday.
The business secretary was forced to explain the proposals a day early in a parliament instead of in a speech to a think tank, after his shadow, Labour's Chuka Umunna, was granted an urgent question.
"We cannot continue to see chief executives’ pay rising at 13% a year while the performance of companies on the stock exchange languishes well behind. We can’t accept top pay rising at five times the rate of average workers’ pay, as it did last year," he told MPs.
He added it was not government's role to "micromanage" pay but the government would aim for "greater transparency", more shareholder powers, more diverse boards and remuneration committees and best practice boards.
Answering questions, Cable said it was "above my pay grade" to comment on speculation about RBS bonuses.
Umunna said he welcomed the plans but they did not go far enough.
Tory MPs in the Commons attacked Cable's plans as "liberal clap-trap" and "drivel", which would harm the country's prospects of economic growth.
The right-wing MPs also criticised the business secretary's plans to increase the number of women who sit on boards, claiming he should be more concerned with how competent executive committees are rather than whether they are suitably diverse.
Cable signalled he was closer to Labour's position than some of his coalition colleagues when it came to tackling executive pay, telling the Commons he had "spoken constructively" with Ed Miliband about the problem.
Prime minister David Cameron said on Monday that he believed organisations should "look at pay ratios" between the highest and lowest paid earners.
Kayte Lawton, IPPR Senior Research Fellow, said the plans were welcome but relied too much on shareholders. "Shareholding in the UK has become increasingly fragmented and short-term, making it hard for shareholders to exercise control over company directors. Over 40 per cent of UK shares are held outside the country, and shares are held for an average of just 8 months."
TUC General Secretary Brendan Barber said ministers had "spectacularly failed to make any significant changes to the status quo" and accused Cable of shying away from the big decisions on top pay.
“Over-paid and under-performing directors concerned about greater public scrutiny of their pay and bonus arrangements can rest easy tonight.
“Any hopes of reversing the damaging and growing pay divide between top executives and the rest of their workforce have faded after today’s announcement.”