Rabu, 20 Juni 2012

Vince Cable to give shareholder votes on executive pay

Vince Cable to give shareholder votes on executive pay

By Harry Glass

PUBLISHED: 03:51 EST, 20 June 2012 | UPDATED: 09:00 EST, 20 June 2012

Companies' shareholders will have to agree the pay packages of their executives in new powers given them by Business Secretary Vince Cable in order to tackle the 'disconnect between pay and performance' in big companies.

Cable unveiled measures which would force companies to reveal the total amount of a boss's pay - including salary, pension entitlements, share options and bonuses - and shareholders will vote them through every three years. 

Currently, shareholder votes are advisory, which means companies can ignore them.

Vince Cable: Drive to make remuneration more transparent

Vince Cable: Drive to make remuneration more transparent

He told MPs in the House of Commons: 'It's right the Government acts to address this market failure.

'Top pay got out of control, most obviously in the banking sector, but also elsewhere in corporate Britain. It was irrational and damaging and it was necessary that shareholders should have the confidence to act.'

But, speaking following months of shareholder revolts as they vetoed pay packages for executives of listed companies, he denied the revamp would hamper industry with 'unnecessary burdens'.

'The Government has...encouraged shareholders to become more engaged as owners of their companies during the so-called 'shareholders' spring'. We have also seen many companies engage constructively in the face of this opposition. This has been an important step for encouraging improved pay discipline.'

The changes would be included in amendments to the Enterprise and Regulatory Reform Bill which is going through parliament.

Firms will also have to publish a simple figure every year showing how much executives have been paid, and state how much they will be paid if they are sacked or resign - the famous 'golden goodbye'.

The moves come amid growing shareholder activism over executive pay - the 'Shareholder Spring' as it has been dubbed - illustrated last week by the rejection of WPP's remuneration report which included a £6.8million pay deal for chief executive Sir Martin Sorrell.

Cable is accused of watering down his plans for the binding vote on pay, which was originally going to take place every year rather than every three. However, if there is any change to a director's deal, it would still have to be approved.

Shareholder Spring: Aviva's Andrew Moss is among the bosses who have been ousted in recent months

Shareholder Spring: Aviva's Andrew Moss is among the bosses who have been ousted in recent months

He has also dropped a proposal that the binding vote must receive the backing of a super-majority of three-quarters of investors, instead opting for a simple majority of 50 per cent required.

'That will come as a huge relief â€" the original proposal threatened to play havoc with the ability of companies to use existing contractual provisions to terminate the employment of directors,' said Christopher Mordue, Partner and Employment Law expert at Pinsent Masons.

It had been feared that a binding annual vote would make investors less inclined to protest in case they destabilised management teams.

Lobby groups yesterday told the Treasury Select Committee that shareholders should move beyond voting down pay reports.

‘I do think they should use these powers more than they have done so in the past,’ said David Paterson of the National Association of Pension Funds.

The powerful groups representing billions of pounds of savings, pensions and investments have urged shareholders to widen their protest to kick out poorly performing directors. Yesterday it was revealed former Cable Wireless Worldwide boss John Pluthero received almost £1million last year, despite a slew of profit warnings and the collapse of its share price.

The £860,000 sum â€" disclosed in the group’s annual report â€" included a payment of more than £200,000 during a threemonth hand-over period between January and March 2012, in which staff said no one had seen him in the building.

Other pay reports released included Dido Harding's, the chief executive of telecoms group TalkTalk, saw her annual bonus double to £400,000, despite having the dubious accolade of the Money Mail ‘wooden spoon’ for most complaints from readers two years in row.

Her overall package rose 28 per cent to £916,000 as a consequence.

However, the Shareholder Spring has seen more pressure on companies, with Aviva's Andrew Moss among the bosses who have been ousted in recent months.

Here's what other readers have said. Why not add your thoughts, or debate this issue live on our message boards.

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As share holders in UK Plc do we all get to vote on the pay of our MPs?

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They should give the directors a double dose of Arrow Root every three years.

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More tilting at Windmills by Vinty. He knows and we know that this is just hot air.

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will this apply to ALL companies - and why not other organisations, particularly Nationwide Building Society where the directors paid themselves an extra 30% all round last year - 'on your side'.

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V C is one of the few MPs who stand up for shareholders rights and what is deemed to be fair. Yet because he is not The PR and media dream boy does he get the support that he deserves? He was right about the M empire and the need to go to do battle but he was sidelined to allow a puppet of the elitist to oversee the media deal and we all know how that turned out. The same cosy relationship which existed between PMs and News C over supper exists between MPs and the boardroom of our PLCs - each one has 4 or 5 very well paid non executive puppet directors which will be well suited for failed/retired MPs to supplement their gold plated pensions! I fail to understand why CEOs pay can not be linked to total shareholder return if it were there would not have been very many bonus paid during the last 3 or 4 years! So please Mr Cable do not allow the 1% club to water down your proposals on the ability of shareholders to control executive pay, benefits, bonus an d pensions!

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Need to create a few laws where directors can be taken to court by say 20% of the shareholders where they are paying themselves a pay increase/bonus that is not reflected by the businesses share price / dividends value increase. Also prevent them from using company lawyers to defend themselves, but the shareholders (owners) can. This will make them think twice before trying to asset strip the company and rewarding themselves for failure. Directors need to have fear instilled in them to put some morals back in to them.

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Why is this ridiculous man still a minister?

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