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UK official says legislation will require binding shareholders votes on pay
LONDON (AP) ' The British government is proposing giving shareholders of major companies a binding vote on executive pay.
U.K. Business Secretary Vince Cable said Monday that the new regulations could require pay arrangements to be supported by 75 percent of shareholders. At the moment, these votes are advisory and not binding.
Executive pay has been a sensitive issue in the U.K., especially when it comes to leading banks backed by the taxpayer, either through bailouts or the implicit guarantee that big banks will not be allowed to fail.
Cable says the government would also this year propose legislation requiring companies to publish their pay policy, how it was implemented, and to what extent that reflected the views of employees.
"The evidence is very clear that business and investors recognize that there is a disconnect between top pay and company performance and that something must be done, Cable said in the House of Commons.
"We cannot continue to see chief executives' pay rising at 13 percent a year while the performance of companies on the Stock Exchange languishes well behind."
The High Pay Commission, an independent body, reported last year that executive pay in Britain's top 100 corporations had risen had risen far faster than overall pay.
At oil company BP, for instance, the top executive was paid 63 times the company's average pay in 2009-2011. At Barclays bank the multiple was 75 times, as was bailed-out Lloyds Banking Group.
Cable said the government would also look at ways of promoting greater diversity on boards of directors.
"Within the FTSE 350 (share index), around 6 percent of remuneration committee members are executives in other companies," he said.
"There's a perceived conflict of interest here, as these individuals have a personal interest in maintaining the status quo in pay-setting culture and pay levels."