DAVID Cameron is set to give shareholders new powers to veto boardroom pay at Britain’s top public companies.
Yesterday the prime minister hit out at “excessive” pay which made “people’s blood boil” and said investors should be given a legally binding vote, beyond their current advisory role, on the pay packages and pay-offs of FTSE 100 directors.
He also called for the reform of remuneration committees to stop “crony capitalism” in which directors who sit on each others’ boards hand out pay rises to one another. Cameron did not name individuals but was speaking just days after it emerged that former Thomas Cook chief executive Manny Fontenla-Novoa, who quit after a series of profit warnings, has been awarded a £1.17m pay-off.
The coalition’s reforms could be included in the Queen’s Speech in the spring, Cameron added, but ministers face a struggle to convince employers’ organisations, which believe changes will be difficult to implement.
John Cridland, director-general of the CBI, said: “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.”
The Institute of Directors said it supported “moderation” in top boardroom pay and binding shareholder votes on pay policies but said “it is not clear what the vote will be on”.
Sir Martin Sorrell, head of WPP – which moved its base to Dublin in protest at Britain’s tax regime – offered cautious backing for the plans, telling City A.M.: “As long as we remain able to be internationally competitive as a result, we’ll be fine.”
Cameron has distanced himself, however, from more radical measures proposed by Business Secretary Vince Cable, raising the prospect of another coalition split over the City. Number 10 is cool on the plans to make companies publish pay ratios, which would show the difference between the salary of the chief executive and the average worker and which could embarrass banks and retailers.
Cable is also likely to have to drop plans to give workers’ groups a seat on pay committees because junior staff do not hold the same legal responsibilities as directors. The findings of a consultation are expected this month.
The largest revolt at a British public company came in 2003 when more than half of GlaxoSmithKline shareholders voted against a plans to award £22m to chief executive JP Garnier in the event that he lost his job.