Vince Cable has published a discussion document proposing changes to company laws and regulations in a bid to control spiralling executive pay and stop “rewards for failure”.
At the Liberal Democrat conference in Birmingham today, the Business Secretary said that, although the renumeration of chief executives at the UK’s largest public companies had risen fourfold from £1 million per annum in 1998 to about £4.2 million by 2010, the value of firms’ shares had risen significantly less.
As a result, something needed to be done to promote “responsible capitalism”, Cable said. One possible measure included giving shareholders a binding vote on pay awards and enabling them to block those felt to be unreasonable.
Another would see employees be given seats on renumeration committees that set pay for chief executives and other directors, in a move that Cable hoped would result in rewards becoming more justifiable.
“It is hard to explain why shareholders can vote to cut top pay, but the managers can ignore the vote. And surely pay should be transparent, not hidden from shareholders and the public. I want to call time on pay-outs for failure”, he said.
Cable also proposed that companies be required to clarify the criteria used to determine executive salaries and perks such as shares, pensions and bonuses. The total renumeration received by each board member should then be published and made publicly available.
In relation to the controversial 50 pence tax rate for people earning more than £150,000 per year, meanwhile, Cable said that if it were axed, then the Liberal Democrats would push for the introduction of a so-called mansion tax on homes worth more than £2 million.
“That would be fair tax and it would be an economically sensible way of taxing. If that were introduced, the 50p rate could be reduced,” he added.
