Directors’ Pay

Lord Myners Excerpts

Wednesday 20th June 2012 Lords Chamber

[Baroness Wilcox]

The right reverend Prelate is right; one of the big worries is the great differential which has gradually opened up between the top pay and that of other employees in the company. As we said in the Statement and as I am happy to repeat now, we will be making sure that companies are looking at the increments and the pay rises that are happening at all levels. I know the right reverend Prelate was in business and it is very nice to have a Bishop in the place who knows something about business.

[Lord Myners]

My Lords, this is the minimum necessary response to a situation in which company directors seem to see their role as driving the cost of everything down except their own remuneration. This is not a strong Statement. The Minister is wrong to suggest the previous Government did nothing. They introduced the Companies Act 2002 which increased disclosure; they introduced obligations for institutional shareholders to publish their votes; they also promoted the Higgs and Walker reviews. So the Minister is simply wrong to say that the previous Government did nothing on this issue. Paragraph 7 of the Secretary of State’s Statement shows that the Government’s policy is both voluntary and binding. When I suggested that earlier this week, the noble Lord, Lord De Mauley, who is in his place, said that he could not envisage a situation which was both voluntary and binding.

However, to questions. First, the Minister says that these reforms will strengthen the hand of shareholders. Can she explain why shareholders could not have introduced these requirements themselves through amendments to the articles of association? I suggest that these reforms do not strengthen the hand of shareholders at all. They already had that power. Secondly, the right honourable Secretary of State said these proposals were introduced in the face of opposition. Can the Minister tell us the opposition to which the Secretary of State was referring in making that comment in paragraph 2 of the Statement? Finally, in her earlier answer the Minister said that employees already have powers to influence company remuneration. Can she tell us what these powers are?

[Baroness Wilcox]

We have engaged extensively with businesses and investors to come up with a robust, workable and enduring package that helps shareholders to sustain the increasing activism which we have seen.

[Lord Myners]

Brief!

[Baroness Wilcox]

I read that to make sure I was absolutely correct because the noble Lord has been quoting paragraph numbers. I would not like him to say that I had made a mistake or moved a comma. Perhaps he will forgive me on that.

It is a radical package. For the first time companies will be bound by a policy approved by shareholders. As to why shareholders did not do more and do it on their own, as the noble Lord knows very well, changing articles is complicated so we wish to help shareholders on their way. The noble Lord is shaking his head vigorously. He has been a Member of this House and has sat on the Labour Benches a long time. He has also been a Minister. During all that time none of this, no matter how frail or small it seems to him now, was done by his party or by him when he was sitting in this position. Let us be clear; one year ago there was not the same level of recognition on the issue of pay. Now business accepts that there is an issue and has been very good in coming forward to have the conversations with us.