Cameron promises powers to limit executives' pay

 

David Cameron: "Big rewards when people fail make people's blood boil"

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David Cameron has promised shareholders a binding vote on executive pay, in an effort to deal with excessive salaries.

The prime minister told the BBC there had been a "market failure", with some bosses getting huge rises despite firms not improving their performances.

He also pledged to tackle large payouts for executives dismissed because of poor performance.

But Labour accused ministers of failing to increase fairness and transparency from boardrooms and the City.

Research from the Institute for Public Policy Research (IPPR) suggests chief executives in 87 of the FTSE 100 companies took home an average of £5.1m in basic pay, bonuses, share incentives and pension contributions in 2010-11.

This represents a year-on-year increase of 33%, while the average increase in company value was 24%, the think tank said.

'Taking money'

And an inquiry concluded in November by the High Pay Commission found that the pay of top executives at a number of FTSE companies had risen by more than 4,000% on average in the last 30 years.

Business Secretary Vince Cable is expected to outlined the government's response later this month.

Mr Cameron told BBC One's Andrew Marr Show that "excessive" bonuses made "people's blood boil", adding: "Government can't tell people what they should be paid but [should act] where you've got a market failure...

Analysis

The people who run the UK's biggest listed companies - those in the FTSE100 index - will tell you their home may be in Britain but their income is very much global. Few of those PLCs earn more than one-third of their annual turnover here. So benchmarking their bosses annual pay package to salaries on this island is comparing tiny apples with giant melons.

But they also know that for the first time in a generation, the political mood has changed. When the leader of a Tory party, which usually believes that the free market should decide almost everything, says that there has been "market failure" in directors' pay, then reform is unavoidable.

But curbing supernormal salaries can happen only if big shareholders, such as large pension funds and banks, change their habit of simply waving through whatever company directors want - irrespective of how damaging that might be to the long term health of their own investments.

Robert Peston: Will shareholders crack down on executive pay?

"Some people are worth £2m [a year] because they've added masses of investment and masses of growth."

Some bosses did not justify their pay and were "taking money from the owners of the companies and from pension-holders and the employees. This is what we will be addressing."

At present, shareholders have a non-binding, or advisory, vote on pay.

The measures under consideration by the coalition are said to include shareholders getting a veto both on pay packages and on deals given to executives who leave jobs in which they have failed.

Mr Cameron promised "clear transparency, in terms of the publication of proper pay reports and binding shareholder votes".

He denied measures would amount to "gimmicks and tokenism", adding that in future "rewards would be linked to success, not failure".

The prime minister hinted that legislation could be announced in the Queen's Speech, which is likely to take place in the spring.

Labour has called for policies on pay and a "more responsible" capitalism.

'Complex'

Shadow business secretary Chuka Umunna said the prime minister was "failing to meet the three tests of greater accountability, transparency and fairness which Labour has set to end the 'something-for-nothing' culture in our boardrooms and the City".

Chuka Umunna: "The PM has fallen far short of what was required today, which is a great disappointment"

He added: "There is no point giving shareholders a vote on executive pay without the greater transparency needed so they can discern the aggregate remuneration executives receive under the complex arrangements currently in place."

John Cridland, director-general of the CBI business group, said: "The CBI wants to see a single figure setting out total pay for senior executives, clear links between levels of pay and performance, and if performance falls short, deferred pay or claw-back arrangements in place, so there are no rewards for failure.

"Government concern on this issue is understandable, but prevention of the problem has to be the answer. Binding shareholder votes would simply be shutting the stable door after the horse has bolted, as shareholders would only be voting after the problem has happened."

And the general secretary of the TUC, Brendan Barber, said the moves would "achieve nothing unless accompanied by a full package of measures to reform corporate pay excess".

Meanwhile, French finance minister Francois Baroin has suggested that an EU-wide tax on financial transactions, including share sales and currency deals, should go ahead.

'Growth agenda'

But Mr Cameron, who fears this would damage the City, said he would veto the proposal, adding: "If the French themselves want to go ahead with a transactions tax in their own country then they should be free to do so.

"We actually have stamp duty on share transactions in Britain and yet we have one of the most competitive and successful financial services markets anywhere.

"But the idea of a new European tax when you are not going to have that tax put in place in other places I don't think is sensible, and so I will block it unless the rest of the world all agreed at the same time that we were all going to have some sort of tax."

The prime minister also promised to work during the year to reduce unemployment, saying the whole government was working to "a growth agenda" for the economy.

And he urged the Scottish National Party government in Edinburgh to hold its proposed referendum on whether to leave the UK "sooner rather than later".

First Minister Alex Salmond has said such a vote will only take place in the second half of the five-year parliamentary term, which began last year.

 

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  • Comment number 538.

    All this user's posts have been removed.Why?

  • rate this
    -6

    Comment number 537.

    Listening to the left-wing bleaters on here, you'd think high executive pay started in May 2010

    You weren't bleating about it when the billions in tax from the financial sector were helping pump up wages and staff numbers in the public sector under Labour.

    Now reality has set in and you're trying to blame Cameron for the disapearance of the "Magic Money Tree" Bluster Brown told you existed.

  • rate this
    +1

    Comment number 536.

    Random 'noise', but still 'funny'…

    @451 "greed CANNOT be enough regulated to save us from ourselves" earns '+3'

    @481 "who amongst WILLING does not deserve (decent life)"… earns '-2'

    The 1% have persuaded the 99% that EQUALITY for the Willing "cannot be"

    ALL, in 1% and 99%, have TO WAIT for able-1% to change 'side', to save People & Planet

    Let us continue, to make a noise...

  • rate this
    +4

    Comment number 535.

    Whatever old Cammo says is good enough for me..

    He clearly spends hours in front of the mirror working on those exaggerated yet convincing facial expressions.

  • Comment number 534.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +3

    Comment number 533.

    Tinkering around the edges...
    The real change would be:
    NO PENSION FUNDS INVESTED SHORT TERM.
    I don't want my pension going into hedge funds!

  • rate this
    +1

    Comment number 532.

    #513

    Would he support a publicly funded health service or media concern or any form of social service?

  • rate this
    +6

    Comment number 531.

    Perhaps maximum allowable exec pay could be some multiple of the national average. We need a minimum wage and a maximum wage.

  • rate this
    +2

    Comment number 530.

    Is this the same David Cameron that was soft in his New International friends. If you want to determine the truth read the Times and think about the exact opposite.

    eg when Times say Ed Miliband is not popular with party supporters.

    The truth is David Cameron and Nick Clegg are even more unpopular with their supporters and the whole country

    Its not spin its political manipulation by 4th estate

  • rate this
    +4

    Comment number 529.

    The idea of having shares in companies is ridiculous to start with. People complain about high prices especially in energy companies yet they want the shares in these companies to have a high return. Its insanity. What's the point in having shares in a company in which YOU have to pay for through high prices. Please tell me.

  • rate this
    +2

    Comment number 528.

    @516 Billythefish
    Current England players definite proof that higher pay will not produce better performance

  • rate this
    0

    Comment number 527.

    @503
    "Work overtime and pay tax on it or work as little as possible and get income support? Yes I do wonder what planet I'm on!"

    Your statement from 159 implies you either work overtime and pay tax, or claim income support. Have I misunderstood something there?
    And in 135 you think you should only pay tax on a part of your total earnings - ??

  • rate this
    +2

    Comment number 526.

    A soldier risks his life and is worth £20K-£30K, a surgeon saves a life and is worth £100-£200K, a FTSE 100 company board member is worth £2 million. It's completely unjust and Cameron's proposals are virtually worthless. We have financial anarchy with the city thieves running riot and the Tories in their pocket.

  • rate this
    +1

    Comment number 525.

    @478. Daniel Carter "...but a EU-wide financial transaction tax will cause a mass exodus of your precious banks will it Dave? This argument is so ridiculous..."
    It might do, to other parts of the world. But more importantly, an EU-wide tax would be collected by the EU/Germans/French and spent by them on projects that probably wouldn't be much (if any) benefit to the UK - e.g. to prop-up the Euro.

  • rate this
    +2

    Comment number 524.

    Re: 509.Peter Ridgway-Davies's point.
    We have a choice if we don’t want to pay the inflated wages of footballers, don't go to the match or pay for Sky Sports, that is where the salaries are coming from. What we do not seem to have a choice in is the inflated salaries of council leaders who earn 4 x the amount of a local M.P, or the monopolies like water or The Post Office.

  • rate this
    0

    Comment number 523.

    494 - Changes

    That old "Less-well paid pay more as a % because of VAT" line is cobblers

    On £200k you pay 43% of your income in IT & NIC

    On £20k you pay 20% of your income in IT & NIC

    Even if the better paid person bought no VATable goods, the lower paid person would need to buy £27,600 worth of VATable goods to pay a higher % in tax!

    It's you trying to decieve.

  • rate this
    +2

    Comment number 522.

    More Cameron PR. You can guarantee that the people with thousands of shares will have equivalent voting while employees will each have one vote. Executives will have to 'deserve' their wage, but what activity exists that can justify their receiving 40 times those of an average worker and annual bonuses equal to a lifetime's average income!. Cameron's owners will carry on as usual.

  • rate this
    +7

    Comment number 521.

    Cameron completely misses the fundamental truth of how our current capitalistic system has reached the point where it victimizes hardworking families, exalts an insular elite and regresses our civilized society.
    His plans will be as effective as a sticking plaster on a brain tumor.
    There, there, Britain; Take your placebo for David so that he can pretend to care.

  • rate this
    0

    Comment number 520.

    Tell me how shareholders are supposed to monitor performance of individual executives, especially when payment "packages" have become increasingly complex. The employee reps sitting on remuneration committees had better be corporate lawyers or equivalent, & they had better be Government employees with signed 'NO CONFLICT OF INTEREST documents.

  • rate this
    +2

    Comment number 519.

    @ Peter Ridgway-Davies
    How many film-stars and the such give large amounts of money to political parties how many offer seats on boards of holding companies and such to politicians when retired!!How many actors go to extreme lengths to avoid a paying any tax and then want a say-so on the running of the economy and how ORDINARY people are taxed and denied public services for political dogma.??

 

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