Directors’ Pay

Lord Renton of Mount Harry Excerpts

Wednesday 20th June 2012 Lords Chamber

[Baroness Wilcox]

I read that to make sure I was absolutely correct because the noble Lord has been quoting paragraph numbers. I would not like him to say that I had made a mistake or moved a comma. Perhaps he will forgive me on that.

It is a radical package. For the first time companies will be bound by a policy approved by shareholders. As to why shareholders did not do more and do it on their own, as the noble Lord knows very well, changing articles is complicated so we wish to help shareholders on their way. The noble Lord is shaking his head vigorously. He has been a Member of this House and has sat on the Labour Benches a long time. He has also been a Minister. During all that time none of this, no matter how frail or small it seems to him now, was done by his party or by him when he was sitting in this position. Let us be clear; one year ago there was not the same level of recognition on the issue of pay. Now business accepts that there is an issue and has been very good in coming forward to have the conversations with us.

[Lord Renton of Mount Harry]

My Lords, I for one on these Benches was very pleased to hear the Secretary of State’s announcement today. The noble Lord, Lord Myners, had a point when he said that shareholders can already veto executive pay. One of problems is that many shareholders are directors themselves and therefore have some considerable interest in seeing that salaries are up there rather than down there. It would be very helpful if it were possible to use the ordinary employees of a company more widely as a blanket on what is finally resolved. The Government should consider how employees who are not at the top of the pay scale can be brought more into the picture. I take it that what is being suggested today applies not just to directors but to executives as well. An executive is not necessarily the chief executive. What he or she is earning will also come under close survey.

[Baroness Wilcox]

The answer to my noble friend’s last assumption is yes. When it comes to employees getting their voices heard, we encourage them to make more use of the tools that they already have, and to which I have already referred, in airing their views on pay, for example. Existing information and consultation arrangements are a potentially powerful mechanism for employees and have been underutilised to date. We will now watch carefully what companies say in directors’ remuneration reports about whether employees’ views have been sought. I agree with my noble friend that we need to hear the views of employees. We want boards to encourage them to use the mechanisms available to them so that we can hear more of what they say.