Business Secretary Vince Cable has announced plans to curb executive pay through boosting shareholder power and requiring firms to justify high salaries.
Cable (pictured) had planned to announce the measures today during a speech to the Social Market Foundation but was forced to unveil the plans to MPs yesterday after Labour called for parliamentary scrutiny of the plans, the BBC reports.
The proposed measures include making firms’ remuneration reports easier to understand with executives having to explain their salaries in relation to other employees’ earnings.
Shareholders would be given a binding vote on executive pay, notice periods and exit packages, rather than the advisory role shareholders have currently.
Cable also wants to see a wider range of people sitting on company boards, such as academics, lawyers, public servants and those who do not have board experience.
The plans would also require firms to bring in “clawback” policies which would mean bonuses could be recouped where later performance shows they were not merited.
Cable said: “No proposal on its own is a magic bullet. But together the measures can enable the necessary transformation to get under way.”
Shadow business secretary Chuka Umunna said the proposals do not go far enough, and called for lower level employees to put on remuneration boards and for firms to publish the ratios between the highest paid executives and the company average.
PricewaterhouseCoopers pay partner Tom Gosling told the Financial Times the plans “represent the most significant recasting of executive pay rules for a decade”.
Fidelity Worldwide Investment has backed the Government’s plans, and also called for directors’ pay to be approved by a 75 per cent shareholder vote.
Global chief investment officer for equities Dominic Rossi says: “We believe that this threshold is warranted to ensure that companies consult widely with shareholders prior to a vote. 75 per cent approval gives companies a clear mandate and the need for a clear majority also encourages all shareholders to express their views. We urge the Government to take this into account during the consultation process which will follow yesterday’s announcement.”