By James Salmon
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The Government was yesterday accused of watering down plans to enable ordinary shareholders to curb greed in Britain’s boardrooms.
In what Business Secretary Vince Cable yesterday billed as the biggest shake-up in executive pay in a decade, shareholders will be given binding votes enabling them to reject bumper bonuses and controversial ‘golden goodbyes’ for failed directors.
But the Government was accused of backtracking on key proposals, with companies needing to secure a majority of 50 per cent of votes to rubber stamp their packages rather than the 75 per cent that Cable had been pushing for.
Key proposals: Businesses need to secure a majority of 50 per cent of votes to rubber stamp their packages
Cable put a positive spin on the retreat, which came after fierce lobbying from business groups, arguing it would prevent minority shareholders from ‘holding companies to ransom’.
In another major concession, he confirmed that binding votes would be held every three years rather than annually, unless the company changes its pay policy. Cable argued this would encourage businesses to adopt a more long-term approach to pay.
But Brendan Barber, general secretary of the TUC, warned: ‘If shareholders are being asked to vote on a vague notion of a company’s pay policy, little will change and directors’ pay will continue to rise at rates that ordinary workers can only dream about.’
Under the reforms, which the Government hopes will be in force by October next year, companies will have to publish a single figure for the total pay that its directors received. Shareholders will also be given a binding vote on how ‘golden goodbye’ payments should be calculated.
Cable claimed the move would stop firms from ‘casually’ dishing out these payments.
But Alan MacDougall, managing director of shareholder lobby group Pirc, said: ‘There may be a risk that companies define their policy broadly enough to slip things through without shareholder approval.’
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