Government reveals plans to curb executive pay

 

Business secretary Vince Cable has unveiled government plans to curb executive pay and address what is “a clear market failing”.

In a speechtoat the Social Market Foundation this week, Cable focused on transparency, shareholder power, diversity and good practice. Although it’s “not government’s role to micro-manage company pay” there are measures ministers can take to address the issue, he said.

Measures proposed included:

  • Firms will have to publish a single pay figure for each individual executive
  • Firms will publish more informative remuneration reports and explain executive salaries in relation to other employees.
  • Firms will not have to publish a standardised pay ratio
  • Firms will publish more information about pay-offs
  • Shareholders will have a binding vote on executive pay, and also get a binding vote on pay-offs worth more than a year’s salary
  • Minsters will encourage firms to increase diversity at board level.

In a guest blog for AccountingWEB.co.uk, however, Essex university accounting professor Prem Sikka criticised the assumptions behind the government's shareholder empowerment drive. Due to the transient nature of corporate shareholdings these days, "empowerment is unlikely to solve the problem of excessive executive pay", he wrote.

Continued...

» Register now

The full article is available to registered AccountingWEB members only. To read the rest of this article you’ll need to login or register.

Registration is FREE and allows you to view all content, ask questions, comment and much more.

Comments
John Stokdyk's picture

NAPF comment

John Stokdyk | | Permalink

 

Joanne Segars, chief executive of The National Association of Pension Funds (NAPF), said: “Greater transparency and simpler pay structures are a must. Boiling all the pay awards and bonus options down to a single figure will help shareholders hold executive pay up to the light.”
She added: “But the introduction of a binding vote needs to be handled very carefully, and shareholders need to know more about what it means. A vote must not impede the effective management of businesses, or the constructive dialogue between shareholders and boards.”