Companies: Executive Remuneration

Lord Donoughue Excerpts

Wednesday 9th February 2011 Lords Chamber

Asked By

[Lord Donoughue]

To ask Her Majesty’s Government what plans they have to monitor the ratio of the average total remuneration of a chief executive of a FTSE company to the median wage.

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, the Government have access to a wide range of statistics about remuneration and have two reviews taking place in this area; the Department for Business, Innovation and Skills' call for evidence, A Long-term Focus for Corporate Britain, and Will Hutton's independent fair pay review. The Government will take further decisions following the conclusion of these reviews.

[Lord Donoughue]

My Lords, I thank the Minister for that helpful reply and note the initial steps, which are really quite good, in dealing with bankers’ pay. Is she aware, as I suspect she is, that the remuneration ratio of FTSE 100 chief executives’ pay and employee pay is currently well over 100:1 and that a recent figure I saw was 128:1, and that the gap has more than doubled in the past decade or so? Do the Government have any plans to deal with this problem which is socially divisive and where the increases often bear no relationship to profit performance? Will the Government require public companies to publish this key ratio in their annual reports so that the public, employees and shareholders can know the facts?

[Baroness Wilcox]

My Lords, I am aware of the growing differential over the past 10 years in the pay of chief executives, executives and employees. The noble Lord will expect me to comment on the fact that this occurred in the decade of the previous regime and we inherited it. We are now looking very carefully at how we can get fairness into this. Excessive differentials are not helpful. At a time of challenging economic conditions, it is important that the focus is on linking rewards to growth.