Labour to embrace High Pay Commission today
8:01 am - January 12th 2012
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Labour’s shadow business secretary Chuka Umunna will today say Labour is looking to drastically change the shape of British companies by pushing for a range of policies to increase transparency and force downward pressure on executive pay.
He will fully embrace the High Pay Commission and say the party will accept its recommendations.
In a speech to think-tank IPPR this morning he will say shareholders should be empowered to get a say on nomination committees – forcing companies to be more accountable on executive pay as well as performance.
The system is already used in Sweden.
He will also say that small groups of executives are “being paid far in excess of what they deserve” and this was hurting the British economy.
The High Pay Commission has put forward a tranche of recommendations to increase transparency, accountability and fairness. The recommendations enjoy support in the business community and are in line with measures implemented in the U.S., Germany and other countries to address these issues. We support them too.
On transparency
Increasing numbers of directors are being rewarded through ever more complex service agreements. Individual reward packages are more generous and ‘performance’ targets seem to be getting easier to hit.
To enhance transparency, the High Pay Commission recommends that:
· Executive pay should comprise a basic salary, with only one additional performance related element where necessary;
· The publication of pay packages of the ten highest paid employees outside the boardroom; and,
· The reporting of pay packages in a standardised form, including a single figure showing total remuneration.
Umunna will say the party will endorse these proposals.
The Commission also proposes that investment and pension fund managers be required to disclose how they vote on all issues, including on remuneration.
He will also offer a full-throated endorsement of worker representation on renumeration committees.
The way non-executive directors are appointed and the backgrounds from which they are drawn – they are often ex executives themselves – is not conducive to the appointment of people who are prepared to shake it up and introduce new ways of thinking.
Unequal pay
Umunna will also endorse the Commission’s call for companies to publish the ratios between the highest paid employees and the median.
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Reader comments
I certainly support the idea that shareholders should control remuneration for the board, (frankly how they lost this power is a complete mystery to me), but the rest looks like the usual hateful fluff.
Also I think that it is deeply wrong to name this organisation the “High Pay Commission” which gives it an official sound that it obviously doesn’t justify.
Generally a good idea. How about suggesting that all bonuses are paid in shares at present value, but may not be redeemed for say 3 years? That way they are likely to reflect the value of the effort in earning the bonus.
Not so sure about “workers representatives” though. Looks more like envy than anything constructive. These are private companies after all!
· Executive pay should comprise a basic salary, with only one additional performance related element where necessary;
Now there’s a great idea. Surely it would be better to have executive pay entirely performance based (but perhaps not simply on one year’s results, and hopefully based on variable targets not just profits). Basic salary is not an incentive to improve performance.
Mind you, I would support more openness and certainly shareholder intervention. The idea of worker intervention is bloody stupid mind – but companies should ideally make employees shareholders in the first place.
Better still, destroy the big company system and replace it with a proper market where money follows success not who you know.
Well done to Chuka for repeating everything David Cameron and the coalition has already said.
@ 4 Tyler
Maybe he got a sneak preview of the latest YouGov poll:
When asked who would be the best PM, Ed has slumped to his lowest ever figure (17%), whilst David Cameron records his highest score (41%).
Employment lawyer and MP complains about people being ‘paid more than they deserve’ Well he’d know.
Shame they didn’t think of this whilst they could actually do something about it. Labour won’t win the next election so why does it matter? I wish they’d actually think about how to get back in power rather than mess around with all this student politics-style posturing
Reactions: Twitter, blogs
- Liberal Conspiracy
Labour to embrace High Pay Commission today http://t.co/VaHIky1e
- Harriet Elena Clarke
Labour to embrace High Pay Commission today http://t.co/VaHIky1e
- sunny hundal
V significant: Labour's @chukaumunna will today embrace High Pay Commission ideas to shake up UK companies http://t.co/jWuVIU7z
- Richard Murphy
V significant: Labour's @chukaumunna will today embrace High Pay Commission ideas to shake up UK companies http://t.co/jWuVIU7z
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Labour to embrace High Pay Commission today http://t.co/VaHIky1e
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Labour to embrace High Pay Commission today http://t.co/VaHIky1e
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Labour to embrace High Pay Commission today | Liberal Conspiracy http://t.co/Jn8KFhic via @libcon
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V significant: Labour's @chukaumunna will today embrace High Pay Commission ideas to shake up UK companies http://t.co/jWuVIU7z
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V significant: Labour's @chukaumunna will today embrace High Pay Commission ideas to shake up UK companies http://t.co/jWuVIU7z
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Labour to embrace High Pay Commission today http://t.co/VaHIky1e
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V significant: Labour's @chukaumunna will today embrace High Pay Commission ideas to shake up UK companies http://t.co/jWuVIU7z
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