There should be no reward for failure, the Prime Minister has said, claiming that excessive payouts to company executives are “ripping off shareholders” – and the Confederation of British Industry (CBI) agrees, at least with the first point.
While stating that it was not a government’s role to tell companies what they can pay people, David Cameron said it was essential that the public saw executives rewarded when they had done something that led to growth and jobs but not when there had been clear failure. And he said that between 1998 and 2010, when Labour was in power, many top salaries had gone up by four times – something the average employee never experienced.
Claiming there had been a “market failure”, Cameron said it would be fair to enable shareholders to be able to vote on executive pay. And he added that he wasn’t interested in tokenistic gestures, such as having an employee present in board meetings, but rather in fairness and transparency.
Saying he was keen not to steal the thunder from Business Secretary Vince Cable, who will outlined the government’s full proposals later this month which could be mentioned in the Queen’s Speech in the spring, Cameron told the BBC the government would address the practice of “taking money from the owners of the companies and from pension-holders and the employees” to reward failure.
CBI director-general John Cridland said: “At a time when family and government budgets are under great pressure, it is important that executive pay is seen to be fair. The CBI wants to see a single figure setting out total pay for senior executives; clear links between levels of pay and performance, and if performance falls short, deferred pay or claw-back arrangements in place, so there are no rewards for failure.”
He added: “Government concern on this issue is understandable, but prevention of the problem has to be the answer. Binding shareholder votes would simply be shutting the stable door after the horse has bolted, as shareholders would only be voting after the problem has happened.”
Dr Pete Hahn of Cass Business School commented: “Outrage at out-sized remuneration is much more about the lack of discipline for those approving absurd awards than those getting the awards. What is the downside for corporate remuneration committees that overpay? In a world of distant and fragmented shareholders with large governments attempting to offer autonomy, the reality is that no-one oversees the overseers. It is the incentives or lack thereof at corporate and public sector boards that have created these problems and an industry of highly paid and equally vested interest consultants that is sure to keep it going.”
And Labour’s shadow business secretary Chuka Umunna said: “The PM has fallen far short of what was required today, which is a great disappointment. There is no point giving shareholders a vote on executive pay without the greater transparency needed so they can discern the aggregate remuneration executives receive under the complex arrangements currently in place.”
Pamela Flores is an events professional with experience at Symposium Events, a UK-based conference and events organization. She has worked in editorial and event coordination roles within the HR and expatriate management sector, contributing to the organization of major conferences including the Expatriate Management and Global Mobility conference. Her background spans online editorial work and events management within the professional conference industry.
- Pamela Flores
- Pamela Flores
- Pamela Flores
- Pamela Flores
