Corporate Governance

Lord Lea of Crondall Excerpts

Wednesday 7th December 2011 Lords Chamber

Asked By

[Lord Lea of Crondall]

To ask Her Majesty’s Government whether they will initiate a review of the structure of corporate governance in large United Kingdom companies, in the light of wider public and social interests in boardroom decisions.

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

My Lords, the Government are examining the responses to a recent discussion paper on corporate reporting, which includes proposals for clearer reporting of corporate social responsibility issues and on executive remuneration. Professor John Kay is due to publish his recommendations for encouraging more long-term behaviour in equity markets in the summer of 2012. In February this year, the Government welcomed the publication of proposals by the noble Lord, Lord Davies of Abersoch, for increasing the number of women on boards, and that work continues.

[Lord Lea of Crondall]

I thank the Minister for that reply, and I apologise for sounding like a frog—I do not mean one of those Frogs, or a Kraut. Do I get more time for all these interruptions?

I welcome the commitment by the Deputy Prime Minister at the weekend to curb the excesses of top boards of directors, whose pay is spiralling up as everyone else's spirals down. Will the Minister accept that the key option to restore confidence in the workforce and the wider society is—in Mr Clegg's words—to break open the closed shop of board remuneration by adding an employee representative? Secondly, does she agree that this test will be missed not by appointing a hand-picked favourite, which would make the whole exercise cosmetic, but by some mechanism whereby the person—he or she—self-evidently has the confidence of the whole workforce?

[Baroness Wilcox]

Some have said that remuneration committee membership as a whole does not come from a wide enough talent pool, that it stifles innovation and that the closed shop of boards and board committees needs to change. We know that diverse boards that bring a range of experience are more effective. The idea of introducing employee representatives may be one way of encouraging more challenge on pay. As I said, we have three consultations out at the moment, all of which report at various times leading up to the spring, so I hope that we will be able to give the noble Lord answers that he will find favourable at that time.