Directors’ Pay

John McDonnell Excerpts

Wednesday 20th June 2012 Commons Chamber

[Vince Cable]

Yes, there is an important role for remuneration committees and the consultants who advise them. One thing I did not mention was the effort being made to ensure that fees for remuneration consultants are properly declared, so that there is more transparency in that aspect of the process.

[John McDonnell (Hayes and Harlington) (Lab)]

I welcome the statement, not least because I proposed an amendment to the Finance Bill to the effect that we should introduce a binding vote. I appreciate that the Government were consulting during that period. However, the shareholder vote is a binary vote—a straightforward yes or no. Does the Secretary of State envisage a process in which shareholders can amend the pay policy, for example to introduce a ratio between the highest and lowest paid within companies?

[Vince Cable]

It will be possible for shareholders’ representatives to work out the ratio because of the information that will become available. We suggested that it would not be sensible to make that metric compulsory, because it can be misleading. I have previously described to the House the anomalies that can arise. A company with a large number of low-paid employees would have a big ratio, but a company that has outsourced such employees, which might be less socially responsible, will none the less have a better ratio, for entirely artificial reasons. We do not attach overriding importance to that measure, but the hon. Gentleman is right that it should not simply be a question of saying yes or no. Shareholders must engage with the company should there be a failure to pass a binding vote to produce a more satisfactory outcome. That is a process, not simply an event.