Shadow Business Secretary Chuka Umunna says the Government is set to water down proposals to give shareholders a binding annual vote on executive pay, accusing his opposite number Vince Cable of being “crafty” over comments he made in the House of Commons this week.
In March, the Department for Business Innovation and Skills published a consultation which proposed giving shareholders an annual binding vote on executive pay and golden goodbyes worth more than a year’s salary, with any changes to policy contingent on shareholders backing it. It also suggested increasing the level of support required beyond a simple majority of over 50 per cent.
It was reported at the weekend that Cable intends to water down the power giving shareholders a binding vote once every three years.
The reform will be introduced in a Government amendment to the Enterprise and Regulatory Reform Bill.
In a debate on the bill on Monday, Cable said it was “current thinking” to keep the annual votes “if pay policy is changed by companies”.
At the time, Umunna welcomed Cable’s comments but now says they actually confirm the power will be watered down.
Speaking to Money Marketing, Umunna says: “He was being very crafty. The key phrase is ’there will be a vote if pay policy is changed’ . Boards will just draft remuneration policy as broadly as possible so they never have to have a vote.
“The backstop is if there is no annual vote is it will happen every three years. That is ridiculous and waters down what the reform is supposed to achieve, which is to hold directors’ feet to the fire and ensure there is constant engagement with shareholders.”
The March consultation was published against a backdrop of speeches from party leaders calling for reform of capitalism. Since then Aviva chief executive Andrew Moss stood down after losing a shareholder vote on remuneration and today 59.5 per cent of advertising group WPP shareholders voted against chief executive Martin Sorrell’s £6.8 pay package. Sorrell is one of 23 members of the Prime Minister’s business advisory group.
Umunna adds: “In the light of the shareholder spring, that political opportunism has now come back to bite the Government which is on the wrong side of the argument.”