The CBI responded to the Secretary of State for Business Dr Cable’s announcement on plans to reform executive pay and introduce binding shareholder votes.

John Cridland, CBI Director-General, said:

“This substantial package of measures strikes a balance, by giving shareholders increased transparency on pay and providing ways to hold Boards to account, without getting them bogged down in day-to-day micro-management.

“The introduction of a binding vote is a big change in the relationship between shareholders and companies, but rightly focuses on Board pay strategy, not individual pay packages. Requiring a vote every three years, unless pay plans change, will allow shareholders to stay focused on the big picture.
“The Government has been persuaded that binding votes should be on a straight majority, which will ensure that Boards are not at the mercy of activist minorities.

“Making sure that exit payments are in line with agreed pay strategy will help to prevent rewards for failure, but it’s right that companies have the flexibility to act in a timely fashion when managing the departure of directors.

“A single figure for total reward should help give shareholders the information they need to judge whether pay is in line with performance. However, as pay packages reflect different circumstances across distinct sectors, the single figure will need to take this into account.
“These measures to improve transparency will help ensure proper attention is given to what signals pay decisions send out to the wider company and the community in which it operates.”