Shareholders will be voting after money has been paid out, says CBI
Prime minister David Cameron has faced a backlash from business leaders after he promised to give shareholders new powers to veto extravagant payouts to failed executives.
Cameron’s attack on City excess just ahead of the bonus season and his plans to introduce more checks on undeserved bonuses were derided as flawed and unworkable.
He promised moves within weeks to give extra powers to shareholders, notably a binding vote on top salaries, to curb the practice of authorising “golden parachutes” to departing executives, and to require companies to provide more details of managers’ salary packages. But business groups pointed out, by the time shareholders would get to vote on multi-million-pound bonuses at the company AGM, the money would already have been paid out to executives.
“Binding shareholder votes would simply be shutting the stable door after the horse has bolted,” said John Cridland, CBI directorgeneral. “Shareholders would only be voting after the problem has happened.”
Downing Street sources meanwhile suggested the power for shareholders to block exorbitant pay-offs would be applied only to newly appointed executives rather than managers on existing contracts, meaning it could take years for the sanction to bite.
The CBI has questioned the idea of allowing shareholders to intervene in executive-pay decisions. It said it preferred the use of claw-back schemes to recover cash from poorly performing managers and said executives should be paid realistic salaries in the first place.
Cameron told BBC1’s The Andrew Marr Show that he knew executives picking up huge cheques even when their companies had failed made “people’s blood boil”. He said: “What I think is wrong is pay going up and up when it is not commensurate with the success companies are having.”
The prime minister said some managers were worth a £2m salary because they helped the economy to expand and created jobs. But he added: “Excessive growth of payment, unrelated to success, frankly ripping off the shareholder and the customer… is crony capitalism and is wrong.”
Cameron signalled that business secretary Vince Cable will soon set out plans to: give shareholders the power to vote on levels of executive pay; enable shareholders to block unjustified dismissal packages for departing managers; require companies to be more transparent about executives’ rewards by publishing clear details of pay packages, including salary, share plans, retirement schemes and other perks. The moves would require legislation, which would be included in the Queen’s Speech in the spring.
