Directors’ Pay

Richard Fuller Excerpts

Wednesday 20th June 2012 Commons Chamber

[Vince Cable]

Guidance will be issued, particularly on what needs to be disclosed and how the legislation will be implemented. The starting point of the hon. Gentleman’s question is absolutely right. To make it clear, we have no objection to people being very well rewarded if their companies perform well. We want to see rewards for success.

[Richard Fuller (Bedford) (Con)]

I draw the House’s attention to my entry in the register of interests as a non-executive director of an alternative investment market-listed company. The Secretary of State is absolutely right to focus on the long-term perspective of compensation and to opt for a three-year, rather than a one-year, binding vote. Will he also emphasise another point about company performance? Often, the issue is relative company performance. When times are good, it is good for a chief executive officer to reflect, particularly in their equity performance, that their company is doing well, because all companies are doing well. I think, however, that the Secretary of State’s aim is that the best companies, doing comparatively well, should be better rewarded. Will he comment on that?

[Vince Cable]

That is a helpful point that is emerging from the study on long-termism, the analysis of which shows clearly that people’s overriding motivation in respect of remuneration changes with relative performance, but what actually matters is absolute performance.