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...


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.


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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  • rate this

    Comment number 718.

    698 "it should be one vote per person not per share."

    So how much investment do you think there'll be in our industry and enterprises when there's no point in buying more than one share?

  • rate this

    Comment number 717.

    The equation is refreshingly simple & I too have found it to be effective - consume less, enjoy more - I do it and it works. You'd be surprised by how little of what you previously thought was indispensable to the enjoyment of your life you can happily forgo & yet still enjoy enjoy ones life, in fact enjoy it more fully. Don't contribute to the wealth of the unworthy or the worthy for that matter.

  • rate this

    Comment number 716.

    # 709 June.
    Wailing is not confined to the downtrodden ...what about the theatrics of the bloodthirsty horsey mobs and their law breaking antics or the squeals from public sector bankers demanding bonuses regardless of company losses.Or should we opt for a the chorus of whining over the 50% tax rate from those who are comfortably off (assuming they're not "mitigating" their bills by offshoring)

  • rate this

    Comment number 715.

    648 Noel says.....semi-literate footballers are also paid a justifiable wage.

    Got News for you Noel, footballers are not paid for being literate. They are paid for their footballing skills.

  • rate this

    Comment number 714.

    Enjoy the spectacle:
    £100 million yachts moored up for the Olympics while folk with no work and no hope of work perish not a mile away.
    Am I missing something here …….?
    If I was monarch, I'm not sure I would want this taking place during my reign.

  • rate this

    Comment number 713.

    707. Billythefirst

    so I took a hefty drop in living standards and retired.

    Consume less; enjoy more.
    Wow - I'd love to retire...unfortunately many folk have received the drop in income but are still both time poor and cash poor..
    So you want me to be in the same boat?

    Socialism really is a "shared misery" philosophy isn't it.

  • rate this

    Comment number 712.

    697.Retired at Fifty
    Glad to hear that you had decent living standards to drop from. You make assumptions regarding posters on this forum. I agree to a point - don't waste time coveting your neighbour's possessions and count your blessings. If everyone's basic needs were met, then I would stop writing letters and waving the banner, but until that time, I will continue.

  • rate this

    Comment number 711.

    I think most of the people complaining about others being paid too much are simply jealous they don't earn massive amounts themselves. I bet if they did they wouldn't be advocating they themselves were paid less because it would be "the right thing to do".

  • rate this

    Comment number 710.

    704. matt in the uk
    where is niew divil or whatever he's called ?

    Sssssshhhhhhhh!! Let him rest in his dark, dank, foetid lair. I'm enjoying Sunday so please don't invoke him today.

  • rate this

    Comment number 709.

    703 D.Shepperd
    Darren life isn't fair. Some are prettier, some are cleverer, some are richer. Bewailing your lot doesn't help - however trying to do something about ti DOES! I have been very poor and quite comfortable. Hard work and not whinging made the difference.

    Like the illustrious campers - if they actually DID something to help others I'd respect them more!

    That's life I'm afraid!

  • rate this

    Comment number 708.

    Vote for the London Peoples Bank run by the People for the People.

    No more bonus for the elite but better deal for savers who are the real owners of a Bank

  • rate this

    Comment number 707.

    so I took a hefty drop in living standards and retired.

    Consume less; enjoy more.
    Wow - I'd love to retire...unfortunately many folk have received the drop in income but are still both time poor and cash poor..

  • rate this

    Comment number 706.

    "704.matt in the uk

    where is niew divil or whatever he's called ?"

    He/she has Sundays off. Or maybe its the day he/she actually does work!

  • rate this

    Comment number 705.

    699. Ex Tory Voter
    Surely that should be Mike Oldfield for PM?
    Mike Oldfield? Probably the dullest rock star ever, apart from Mike Batt... I associate RB with the Derek and Clive ...Horn... video, just like I associate Rowan Atkinson with Blackadder rather than Mr Bean.

  • rate this

    Comment number 704.

    where is niew divil or whatever he's called ?

  • rate this

    Comment number 703.

    what utter rubbish june its not about envy its about fairness something no tory ever had any idea about just like truth decency and respcting your fellow human.
    Only good tory MP is an unemployed one

  • rate this

    Comment number 702.

    Another story on this site relates to Schools being overcharged for equipment.

    The Leasing Advisory Service (not a government body but a private company) is making a fortune out of the public sector

    Maybe Mr Cameron should look at this kind of parasite rather than public companies

  • rate this

    Comment number 701.

    OK lets see if Cameron has the balls to create a law that linits the rate of pay for the CEO, bankers etc that limits their pay and benefits to 10x the rate for the average pay. Same goes for the waste of space cabinet, who could not work their way out of a paper bag without help

  • rate this

    Comment number 700.

    Well it's either 'more faces than the church clock', to avoid turbulence or regular 'punch ups'. It matters in politics to be transparent and honest (we can only dream!), but to the man/woman in the street, it doesn't hurt to say that their shoes are nice, even if they aren't - spare their feelings. The Coalition, Establishment - we expect lies and do little about it.

  • rate this

    Comment number 699.

    "687.J J Hunsecker

    Can Richard Branson be PM please?"

    Surely that should be Mike Oldfield for PM? Without him Mr. Branson wouldn't have had his lucky break, and we'd never have heard of him.

    (Slightly cynical, but luck does play a large part in success)


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