Prime Minister David Cameron has promised to tackle excessive salaries by offering shareholders a binding vote on their pay.
Speaking to the BBC, Cameron said there was a “market failure” as some bosses received huge pay rises without improving their firms’ performance.
Cameron, who has also pledged to tackle large payouts for executives who are dismissed because of poor performance, said that excessive bonuses made “people’s blood boil”.
He said:”Some people are worth £2m a year because they’ve added masses of investment and masses of growth.”
However, Cameron said some did not justify their pay and were just “taking money from the owners of the companies and from pension-holders and the employees.”
Shareholders currently have a non-binding, advisory, vote on pay. The Coalition is looking at allowing shareholders a right to veto share packages and deals offered to executives who leave their jobs after failing to boost the business.
Cameron called for “clear transparency” when it came to pay reports and shareholder votes and has hinted that legislation could be announced in the Queen’s speech in the spring.
Figures from the Institute for Public Policy Research found that 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 was a 33 per cent year-on-year increase.
CBI director general John Cridland says: “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.”