Cable announces plans to curb executive pay

(From the BBC)

Business Secretary Vince Cable has unveiled plans designed to curb executive pay in a speech to MPs.

Shareholders will be given more powers to block excessive pay packages and companies will be encouraged to increase diversity on their boards.

Firms will also have to justify high salaries in their remuneration reports.

The proposals had been due on Tuesday, but were brought forward following an intervention by Labour, who say they do not go far enough.

Mr Cable said a consultation on the issue had made it clear there was "a disconnect between top pay and company performance".

'No magic bullet'

He said it was "not government's role to micro-manage company pay", but there were steps ministers could take "to address what is a clear market failure".

Measures proposed include:

• making firms' remuneration reports easier to understand, and requiring them to explain executive salaries in relation to the earnings of other employees
• increasing transparency by requiring the publication of all directors' salaries
• giving shareholders a binding vote on executive pay, notice periods and exit packages - at present their say is merely advisory
• encouraging a wider range of people onto company boards, including academics, lawyers, public servants and those who have never served on a board before
• requiring all companies to introduce "clawback" policies, allowing them to recoup bonuses in cases where they are later shown to be unwarranted

Mr Cable said government hoped to set "a robust framework", but there was "no magic bullet" to bring about change.

He said progress would depend on shareholders and companies themselves taking more responsibility, but "for the most part" businesses accepted the need for reform.