Cameron backs vote on bosses’ pay

The Prime Minister said he had backed the move as part of a package of measures due to be unveiled by Business Secretary Vince Cable within the next six weeks.

Legislation was likely to be included in the Queen’s Speech this spring, he indicated, to deal with what amounted to a “market failure” of fast-rising pay despite the economic downturn.

But he questioned the value of measures demanded by Labour such as putting workers on pay boards – saying he wanted to avoid “tokenism”.

Shadow Business Secretary Chuka Umunna said the ideas proposed by the Prime Minister “fall far short of what is needed to end rewards for failure”. He said far more radical reforms were required to meet tests of transparency, accountability and fairness.

The Prime Minister said he knew that executives picking up huge cheques even when companies failed made “people’s blood boil”.

“What I think is wrong is pay going up and up and up when it is not commensurate with the success companies are having,” he told BBC1’s Andrew Marr Show.

“Some people are worth £2m because they have added masses of jobs, masses of investment, masses of growth. But excessive growth of payment, unrelated to success, frankly ripping off the shareholder and the customer... is crony capitalism and is wrong.”

Confirming one element of the package, he said: “The absolute key, and I can confirm this today, that does need to happen and will happen is clear transparency in terms of the publication in terms of proper pay numbers to really see what people are being paid and then binding shareholder votes so the owners of the company vote on the pay levels and – absolutely key – votes on parts about dismissal packages and payments for failure.

“We have a Queen’s Speech coming up in the spring this year. I don’t want to pre-empt it but it is very likely to include legislation on companies and on banking and things like that, so there is room to make legislative changes if that is necessary.”

He told the Sunday Telegraph is would end the “merry-go-round” of super-rich bosses rubber-stamping each others’ deals.

Labour’s proposals include simplifying remuneration packages into salary and one performance-related element and publishing a league table of how much more bosses earn than employees.

It also wants an obligation on investors and pension fund managers to disclose how they vote on remuneration packages and a repeat of the bank bonus tax.

Mr Umunna called on the Prime Minister to adopt in full the recommendations of the independent High Pay Commission. “Although he tries to talk the talk on executive pay, he is refusing to stand up to vested interests,” he said.

The change was welcomed by union leaders and insurance firm chiefs but questioned by the CBI.

TUC general secretary Brendan Barber said: “It’s great to see all three main political parties finally coming round to policies that the TUC has advocated for a decade.

“But while binding shareholder votes on remuneration packages is an encouraging start, it will achieve nothing unless accompanied by a full package of measures to reform corporate pay excess.”

The CBI questioned the effectiveness of binding shareholder votes and called for arrangements allowing bonuses to be recovered if performance later falls short.

Mr Cameron’s commitment to votes came as research showed total remuneration of chief executives in 87 of the FTSE 100 companies rose 33 per to an average £5.1m last year as the values of their businesses rose only 24 per cent.