In a move to what he calls ‘responsible capitalism’ Vince Cable the coalition business secretary is expected to set out plans today that give shareholders and employees the right to have a say in board-room pay deals.
He also wants the total value of remuneration of London Stock Exchange listed companies’ directors to be laid out in a comprehensible form.
Annual company reports should also be forced to include explanations from remuneration committees justifying excessive pay deals where performance does not appear to warrant them. They will also have to detail how future bonus awards can be achieved.
In this way the full picture of executives’ pay together with all the perks in the form of expenses, bonuses and pensions will be laid bare for analysis.
Vince Cable told BBC Radio 4 that he wanted to see what appeared to be a culture of rewarding failure being replaced by proper remuneration for success by the risk takers and entrepreneurs in modern business.
Quoted in the Telegraph Mr Cable said "What we want to do is reward success in business. We want entrepreneurs to succeed, be properly rewarded, risk-takers, inward investment. What we do not want is rewards for failure, and the pattern over the last decade or so has been that there has been a massive increase in executive pay, management pay – 400% over a decade at a time when share prices for the owners have not increased at all and basic pay has not increased.”
As the Independent pointed out, the pay for the average chief executive has gone up from Â£1 million in 1998 to today’s Â£4 million. Some increase when you consider that over the last couple of years there has been a massive recession.
It is expected that the new rules will come into force in October 2012.