Last week, Lib Dem Secretary of State for Business, Innovation and Skills Vince Cable announced sweeping changes to the way in which top-level executives have their pay and bonuses decided. This change, described by the government as the ‘most comprehensive reforms of the governance framework for directors’ remuneration in a decade’, will:
- Give company shareholders binding votes on both executive-pay policy and exit payments (the amount of money an executive receives if they resign or leave their contract early)
- Boost transparency – allowing the link between pay and performance to be clearly drawn
- Ensure that the reforms have a lasting impact by keeping the shareholders in the driving seat and maintaining their recent boardroom activism
“At a time when the global economy remains fragile, it is neither sustainable nor justifiable to see directors’ pay rising at 10 per cent a year, while the performance of listed companies lags behind and many employees are having their pay cut or frozen.
“In January we kicked off a national debate aimed at encouraging shareholders to become more actively engaged as company owners in better aligning directors’ pay with performance. I have been greatly encouraged by the ‘shareholder spring’ and I want to see that momentum sustained. That is why I am bringing forward legislation to strengthen the powers of shareholders through a binding vote on pay.”
As Liberal Democrats, we believe that the success should run through UK business from top to bottom. We want to see the values of fairness and responsibility in the setting of top-level pay, and we want to see proportionality – no more rewards for failure, no huge executive increases at the expense of low-paid workers below – at the heart of British business.
You can find more information on the upcoming Enterprise and Regulatory Reform Bill here.