Business Secretary Vince Cable has unveiled government plans to curb executive pay and address what he described as “a clear market failing”.
In a speech to MPs this week, Cable focused on matters of transparency, shareholder power, diversity and good practice, saying that. although it was “not government’s role to micro-manage company pay”, there were measures that ministers could take to address the issue.
The measures proposed included:
- Employers having to publish a single pay figure for each individual executive as well as more informative remuneration reports and to explain the rationale behind executive salaries in relation to the wages of other employees
- Not requiring employers to publish a standardised pay ratio, but mandating that they publish more information about pay-offs
- Ensuring that shareholders would have a binding vote on executive pay and pay-offs worth more than a year’s salary
- Encouragement by ministers to increase diversity at board level.
Cable said of the suggestions: “No proposal on its own is a magic bullet, but together the measures can enable the necessary transformation to get under way.”
He added that whether such proposals were adopted or not would depend on whether shareholders and firms’ themselves took responsibility for them.
The Labour Party welcomed the recommendations, but warned that they did not go far enough. Shadow Business Secretary, Chuka Umunna, called for lower-level employees to be given a seat on remuneration boards and for employers to have to publish the ratio between the highest and lowest employee salaries.
