Corporate Governance

Desmond Swayne Excerpts

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

[Greg Clark]

You are absolutely right, Mr Speaker, and I apologise.

I hope the hon. Gentleman will contribute to the consultation. It is clear that he shares an interest in improving the standards of corporate governance, which we have done from time to time in this country over many decades. We have a good reputation for corporate governance, and it is important to record that the rest of the world looks, and has looked, with admiration at the British economy, the rule of law and the non-legislative aspects involved. I hope he will agree that the examples of poor corporate governance he mentioned are blemishes on a very strong overall record of responsible corporate behaviour in this country. We should put on record our recognition of the importance of business and our support for the job creators, the risk takers, the innovators and the investors—the people who, through their profits, generate the taxes that sustain our public services.

It is reasonable to have a constructive discussion on this matter through the consultation, and that is what we intend to do. The hon. Gentleman said that executive pay had been escalating. Perhaps he would like to reflect on the fact that the biggest rise in chief executive pay was actually in the period from 1998 to 2010, when the average rose from £1 million to £4.3 million a year and the ratio of chief executive pay to full-time employees’ pay rose from 47:1 to 132:1. He is a reasonable and generous man and I know that he will concede that, under the years of Conservative leadership, the average pay for chief executives has fallen from £4.3 million to £4.25 million a year and that that ratio has fallen from 132:1 to 128:1. So we are moving in the right direction and these further reforms will take us further.

The hon. Gentleman mentioned the proposals to have workers and consumers on boards. The Prime Minister has been very clear on this, and it is testament to her leadership that she set out her intentions right at the beginning of her term of office and that we are now coming forward with these proposals. She made it clear that we would have not just consumers but employees represented on company boards, and these proposals will allow that to happen and encourage the practice to be taken up.

The hon. Gentleman mentioned the relevance of our reforms to the more high-profile sources of controversy. Of course, one option is to extend the good provisions for public companies to our very largest private companies. He will know that the Financial Reporting Council’s governance code requires extensive monitoring of risk levels for plcs over and above the requirements placed on limited companies. He mentioned cases involving listed companies, and I hope he will agree that having a greater connection between employees and directors is a step in the right direction. Conservative Members are unashamedly and unequivocally pro-well-run business, and I hope that he shares our view. Consistent with that, it is important to work with business, employees and other groups from time to time, to look at what we can do to stay ahead of the pack. That is what this consultation does.

[Sir Desmond Swayne (New Forest West) (Con)]

Will any of these proposals result in a diminution of the pile of cash on which corporate Britain is sitting, and of the practice of companies buying up their own shares?

[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.