We will 'get tough' on excessive boardroom pay - Clegg

 

Nick Clegg says the coalition will bring forward proposals next month

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The government is to publish new proposals to curb "unjustified and irresponsible" pay rewards in the private sector, Nick Clegg has said.

The deputy prime minister said ministers would announce plans to "get tough" on excessive boardroom pay in January and may legislate if necessary.

Among likely steps is widening the membership of remuneration committees, which set pay, to include workers.

Recent figures showed executive pay at the UK's top firms rose 50% last year.

Pay research firm Incomes Data Services said this increase took the average pay for a director of a FTSE 100 company to just short of £2.7m.

Mr Clegg told the BBC's Andrew Marr that these figures were a "real slap in the face" for workers on middle and low incomes, who are seeing their pay frozen.

The government should not be setting pay rates, Mr Clegg stressed, while making clear he supported top executives being well rewarded if their companies were successful.

'Closed shop'

But he said "greater transparency" was needed over the process of setting pay and that top bosses should not be rewarded for poor performance.

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I would be staggered if any Tory prime minister and chancellor - even those who have repeatedly said that "we're all in this together" - would legislate a legal maximum for bosses pay”

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"We need to get tough on irresponsible and unjustified behaviour of top remuneration of executives in the private sector," he said.

"What I abhor is people getting paid bucket loads of cash in difficult times for failure."

Remuneration committees, the bodies which set the pay of top executives, were too often "closed shops", resembling "old boys" clubs, and he wanted to "break open" membership of these bodies.

Labour want workers to have a seat on remuneration committees to ensure their voices are heard and Mr Clegg suggested this was one area being looked at.

Business Secretary Vince Cable announced a consultation on how executive pay is determined and measures to empower shareholders at September's Lib Dem conference.

Among ideas floated were requiring companies to set out in the detail the criteria for pay awards.

While the Lib Dems have been keen to act in this area, the Conservatives have been seen as more reluctant although Prime Minister David Cameron has also attacked so-called "rewards for failure".

'Heavy lifting'

Analysis

Who does the "heavy lifting"?

Nick Clegg picked his examples of public and private sector workers carefully this morning: A nurse versus a factory worker, a taxi driver and a civil servant, suggesting that all were sharing the pain of the "tough times".

But he also suggested that more could be done by the government to limit the level of pay for those in the private sector who earn far more than any of them.

We've heard similar comments from Liberal Democrat Cabinet ministers, such as the Business Secretary Vince Cable, before.

They believe that there is now a degree of consensus in the political and business worlds about measures that could give shareholders and employees more power over how much company bosses are paid.

That wouldn't extend to the government setting pay rates; this is not, one adviser said, "back to the 70s".

Mr Clegg's comments came after it emerged that Lloyds Banking Group is looking to "claw back" up to half of the £1.45m bonus it awarded to its former chief executive Eric Daniels.

The Daily Telegraph reported lawyers have told Mr Daniels and other executives Lloyds is considering withholding part of their bonuses after it announced a £3.9bn loss for the first nine months of 2011.

Although Chancellor George Osborne increased the bank levy in last week's Autumn Statement, the unions say the public sector is bearing the brunt of measures to rebalance the public finances with workers facing a new 1% cap on pay rises after the current two-year pay freeze ends in the Spring.

Mr Clegg said the public sector could not be seen to do "all the heavy lifting" when it came to the government's austerity programme and that people "in a sense living by completely different rules in the private sector" should also be held to account".

As it was essential that the country did not become "divided" in these tough times, he said the coalition must "redouble its efforts" to show its deficit cutting plan was as "fair as possible".

He also suggested he would support well-off pensioners forfeiting their current entitlements to free TV licences and bus passes in future - something that the government has rejected in the past.

 

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  • rate this
    0

    Comment number 823.

    This government is getting itself all twisted up in this unnecessary public vs private sector debate. There is a role for both in any modern economy. You can't stop private businesses from paying their managers large salaries if they wish to. The Public sector must also be allowed to flourish because there are so many things the private sector can not or will not do.

  • rate this
    +13

    Comment number 820.

    Well I think senior managers and director should be linked to the pay of the lowest paid employee in their company e.g. 10x the pay of the lowest paid employee, and all employees pay should be linked to the amount of profit a company makes or how efficient an organisation (e.g. government department). So everyone would be fairly paid in proportion!

  • rate this
    +1

    Comment number 811.

    As a time-served LibDem I find this a bit boring. No proposals! Just dae sumthin', as we say in Scotland. Pick from the following; 'unjustified' pay should be justified, to the shareholders, publically: define 'irresponsible' and add a veto: tighten Companies Act so all pay deals are in the accounts: publish directors' contract details of future pay vs future performance. Easy Np review needed

  • rate this
    +3

    Comment number 804.

    It seems to me that a process that ought to be entirely accountable to the shareholders has become so abused - and unaccountable - that it is hard to justify no change. By all means reward success, but don't pay large bonuses for poor results. We need best practice guidelines published by an independent body. Shareholders should refuse to accept payments outside the guidelines.

  • rate this
    +5

    Comment number 781.

    It's not a question of telling chairman that they can't have high pay it should be more of closing the gap. Rather than maximum pay it should be a proportion based system. Namely that a directors pay should not be 'x' times more than the company average. If the CEO want's a big pay rise then he'll have to give out good rises throughout his/her company. They can't achieve success on their own!

 

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