SHAREHOLDERS are to be given a binding vote over company remuneration policy as part of plans to curb executive pay unveiled by business secretary Vince Cable.
The proposed measures include giving shareholders greater powers to agree pay proposals, making remuneration reports easier to understand and increasing transparency.
Boards would also have to provide detail on how reward structures support company strategy, while executives would have to explain their pay rewards in relation to other employees.
“No proposal on its own is a magic bullet but together they can enable a major transformation,” Cable told parliament.
However, business lobby groups have raised doubts over whether Cable’s plans will succeed in curbing executive pay.
Terry Scuoler, chief executive of manufacturers’ organisation the EEF, warned that the proposals “risk aiming a large sledgehammer against the wrong nut.”
“Giving shareholders a binding vote at AGMs will prove intrusive but is unlikely to be effective,” he said. “Rather than focussing on the pay of top managers, which are set by global markets, the government should maintain on its focus on helping employers create well paid opportunities for the rest of the workforce and ensuring it has skills to fill them.”
The CBI warned that the proposal that binding votes for shareholders will not be retrospective “does not make for good corporate governance as investors will be second-guessing and ‘man marking’ directors.”
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