David Cameron faced stern reactions from business leaders as well as calls for stronger action from his political rivals in the wake of his executive pay plans.
Cameron's plans to allow shareholders to veto executive pay came under fire throughout yesterday and today. But just ahead of the City’s annual bonus season, Cameron’s plans were criticised as being ineffectual.
John Cridland, the Confederation of British Industry’s director-general, said: “Shareholders would only be voting after the problem has happened.”
Just as Cameron chooses his new political warfront, the problem of corporate excess has come in the spotlight. Yesterday it emerged that Stephen Hester - chief executive of Royal Bank of Scotland - may pick up a multimillion-pound bonus.
Downing Street sources suggested yesterday that the power of shareholders to block pay increases would only be applied to newly appointed executives and not managers on existing contracts - meaning it could take years for the sanctions to bite.
The Association of British Insurers warned that legal action could face companies whose directors’ promised bonuses have been blocked by shareholder vetoes. The National Association of Pension Funds also displayed concerns about Cameron’s plans, arguing that the authority of corporate board members could be undermined by shareholder voting rights on executive pay.
Dr. Roger Barker, Head of Corporate Governance at the Institute of Directors told Huffington Post UK: “We are supportive of a binding shareholder vote on executive renumeration as proposed by David Cameron, but it should relate to the renumeration policy – not the actual outcome. The latter would create a number of contractual and legal problems”.
Brendan Barber, the Trade Union Congress general secretary, said yesterday that the measures would "achieve nothing unless accompanied by a full package of measures to reform corporate pay excess".
Research published yesterday by the Institute for Public Policy Research (IPPR) think tank revealed that the total remuneration of CEOs in 87 of the FTSE 100 companies rose last year by 33% to an average of £5.1m, while the values of their businesses rose by only 24%.
Shadow business secretary Chuka Umunna said yesterday : "Labour has called on the Government to show that it is serious on this issue and to take the action needed to stop rewards for failure - yet again it has fallen short."