Corporate Governance

Callum McCaig Excerpts

1st reading: House of Commons
Tuesday 29th November 2016 Commons Chamber

[Greg Clark]

We are encouraging a greater role for shareholders in driving behaviour in the boardroom, because this is a matter of concern. It is connected to the point that—to be fair to him—the hon. Member for Norwich South made about long-termism. We want to see a more patient form of capital sustaining businesses that have the capacity to grow, and I hope that this will come out as part of the consultation.

[Callum McCaig (Aberdeen South) (SNP)]

May I start by giving a cautious welcome to the Secretary of State’s announcement? It represents some progress, but there are aspects missing and more clarity is required in some areas. There is general consensus that the pay gap between executives and employees is too large, and we firmly believe that addressing that by properly valuing and investing in employees is a key part of addressing the productivity problem. Companies need to be transparent about pay. If their pay for executives is justifiable, they must justify it to their staff and to their shareholders. In particular, the move to give shareholders greater control and a binding vote on executives’ pay is welcome. Indeed, it is incredible that such a situation does not already exist. What is the timescale for the entire process, and when will the changes be implemented?

More needs to be done about boardroom diversity. I was given very short notice of the statement, and it remains unclear what is to be done about diversity in the boardroom. Will the Secretary of State expand on that aspect of the proposals? I think we would all like to see boardrooms reflecting society more completely. That would be good for business and it would send a clear message to everyone across the country that business is a place for them.

Let me turn finally to the question of workers on boards. In the Prime Minister’s party conference speech, she said:

“Too often the people who are supposed to hold big business accountable are drawn from the same, narrow social and professional circles as the executive team.”

From my reading of the proposals and from what the Secretary of State has said, it appears that that will remain the case, but with one person from those same narrow social and professional circles designated to speak to the employees or consumers. That does not go far enough; it is a missed opportunity. When the Prime Minister said, “We are the party of workers,” was that post-truth or was it never true at all?

[Greg Clark]

I am grateful for the way in which the hon. Gentleman started his remarks, at least. He struck the right tone in welcoming the proposals as a sensible way to proceed, as I believe all business organisations, consumer groups and others have done. I hope that he will contribute to the consultation. He made a point about the value of transparency, and that is very much what we are proposing. We do not want to specify the appropriate pay for a chief executive—I do not think he does either—but it is right that companies should justify their decisions to shareholders and to employees. They should make their case for the pay and the package that they are choosing to offer.

The hon. Gentleman asked about the timing of the consultation. It will close in three months’ time, in February, and we will respond as soon as possible after that, depending on the number of responses. He also asked about diversity on boards and remuneration committees, and he will see that both questions are addressed in the Green Paper. It is important that remuneration committees are advised by and have a greater connection with the workforce, and that they should be less insular in their approach. There has been some criticism that the overlap of remuneration committees in public companies has excluded outside voices. The consultation refers to particular reviews of gender and ethnic diversity on boards, and it is important that we continue to make progress in that regard. We have further to go. Finally, the Prime Minister was very clear that we should have consumers and workers represented on company boards and that is what the proposals will do. This is a big advance and it has been warmly welcomed. I hope that the hon. Gentleman will support it too, when he makes his response to the consultation.