The party had been inclined to introduce legislation should it get into power requiring companies to obtain shareholder approval at annual meetings for executive pay packages. It had also been examining changes in the Companies Act to make tougher corporate governance standards a Stock Exchange listing requirement.
But yesterday the shadow chancellor, Gordon Brown, stepped back from a statutory approach that would force companies to toe the line on corporate governance.
At a London conference to set out Labour's manifesto for business, he said that voluntary agreements brokered between institutional investors and boards of companies would be far more beneficial than statutory changes.
His comments were reinforced by Alistair Darling, the shadow chief secretary to the Treasury, whose portfolio includes corporate governance issues. He said the best way to improve standards and practices in boardrooms was through "cultural change". A number of institutions had begun to pressurise companies to amend "imprudent" remuneration packages and board structures.
Senior Labour politicians have been saying privately for some time that a voluntary approach was likely to be favoured above one built on new legislation but this is the first time the party has openly rejected a statutory means.
The 26-page manifesto, New Opportunities for Business, makes it clear that Labour wants to build on the voluntary approach adopted by the Greenbury and Cadbury Committees and the successor Hampel Committee, chaired by the chairman of ICI, Sir Ronnie Hampel, who is looking at what further changes might be needed in corporate governance standards.
"An expert panel on corporate governance should be established with a broad membership to draw up codes of practice on key issues," the document says. It adds that Labour will want a full and early report from the Hampel Committee.
Comment, page 21