The Government has proposed giving shareholders a binding vote on executive pay.
A consultation from the Department for Business Innovation and Skills on corporate governance, published last week, puts forward the idea of shareholders having an annual binding vote on executive pay and golden goodbyes worth more than a year’s salary. It also suggests increasing the level of support req-uired for pay packages beyond a simple majority of over 50 per cent.
Business Secretary Vince Cable says: “I have no problem with business celebrating success and rewarding talent, but I have heard frustration from all circles that directors’ pay goes up when times are good, and yet it still goes up when performance is poor. I want shareholders to feel empowered to prevent rewards for mediocrity or failure.”
BIS says the proposals would see companies reporting annually on how they have res-ponded to shareholder concerns and taken previous votes into account.
It says the changes would promote engagement between companies and those who invest in them and create a stronger link between pay and performance.
Cable says: “Good corporate governance is vital to creating the right environment for long-term, sustainable growth. Shareholders are at the heart of the UK corporate governance framework, so it is appropriate that we put more information and power in their hands.”