Business executives’ pay was under scrutiny today as Vince Cable proposed new powers for shareholders.
Salaries and bonuses of executives in some of the biggest businesses in the UK have shocked a recession-hit nation.
Business Secretary Vince Cable explained in a speech to the Social Market Foundation today that shareholders should be given more power to take the lead in curbing failing executives’ pay,
In 2010 there was a 49 per cent rise in executive pay at companies in the FTSE 100 companies, which includes Tower Hamlets-based Barclays and HSBC.
Cable was forced to reveal his proposals a day early in the House of Commons yesterday by Shadow Business Secretary Chuka Umunna.
Following his announcement, the TUC criticised the proposal for not pledging the involvement of company workers on executive pay boards.
Instead his plan asks that companies prove to their shareholders that employee pay and opinion has been take into account when setting executive pay benchmarks and bonuses.
Most significantly, shareholders will be given a binding vote on company pay policy, enabling them to veto excessive executive pay.
When asked by East London Lines if the hundreds of thousands of pounds of share options the executives get each year would be non-voting, the Business Secretary could not say. Should their shares be voting, the executives may be able to vote on their own pay.
Also Cable accepted that most shares are held by very rich investors who could be unwilling to cut executive pay.
He stressed that these plans are not aimed at dealing with the wider issue of fairness and that they alone won’t bring about a more desired ‘responsible’ capitalism. That change of culture, he claimed, needs to be made from within the companies.
John Springford, Senior Reseracher at the Social Market Foundation, told East London Lines that though helpful and necessary, the proposals are no substitute for increased market competition to change the culture;
EastLondonLines spoke with a number of people from the small business sector.
StartUp Britain’s campaign director Farid Haque questioned the impact that the proposals would have;
Independent bookseller Tom Usher was pessimistic about shareholders chances of making a difference;
By Alex Bishop