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Business Comment

David Prosser: CBI gets it wrong on executive pay

Outlook One cheer only for the CBI, which yesterday joined those calling for reforms that prevent all but the most outstanding executives pocketing whacking pay rises. Its backing of proposals that would allow companies to claw back pay from executives where performance does not endure is welcome, particularly in the context of Thomas Cook, a struggling business that saw its chief executive leave earlier this year having received enormous rewards for failure.

The rest of the CBI submission to the Government's consultation exercise on executive pay is depressingly familiar, however. Employees shouldn't have a voice on remuneration committees, the employers' organisation insists, because they may not understand what is needed for the businesses. And shareholder votes on pay should not be binding because to make them so "would fundamentally alter the UK's basic framework of corporate governance".

Let's deal with the second point first. The truth is that while the number of revolts over pay at company annual meetings has increased markedly over the past couple of years, you can count on the fingers of one hand the occasions when a majority of shareholders has voted against the remuneration report. Investors, certainly the institutions, generally prefer not to rock the boat. In any case, is the CBI really saying that the owners of our companies should only have an advisory role in setting the pay of the executives charged with running the show?

As for employee representation, the CBI's view is the sort of throwback to the them-and-us culture that would drive it potty were the trade unions, say, to talk this way. Its view is that a worker would "add little" to the process of remuneration committees setting pay. What a dim view the organisation takes of the staff its members employ.