Pay curbs to put fat cats on a leash
Cable says sweeping change lets shareholders see full details of top executives' remuneration
Vince Cable has vowed that "shareholders will no longer be kept in the dark" over executive pay, ahead of the introduction of binding votes this week.
The business secretary told The Independent on Sunday that the votes on pay will be a "powerful tool" in clamping down on the corporate excess that led to last year's shareholder spring of pay revolts which claimed high-profile scalps.
The shake-up affects the more than 900 companies on the main list of the London Stock Exchange and comes in the wake of a quadrupling of bosses pay over the last decade.
In addition to the binding vote on pay policy, companies will have to report all elements of directors' pay in a single cumulative figure.
The regulations spell out how this must be calculated to ensure a consistent approach, and comes in the wake of the increasing complexity of so-called "long-term incentive schemes". These can add millions to bosses' packages.
Companies will be further required to improve disclosure on performance conditions and illustrate the level of awards for various levels of performance.
Mr Cable said: "Over the last decade the pay of our top executives has quadrupled, but it has not always been an indication of how well a particular company has performed.
"At the same time company reports have become increasingly complicated without giving shareholders the right sort of details they need in order to evaluate performance."
He said that the reforms would now mean every shareholder – big or small – would have the tools to allow them to "speak up and challenge companies over excessive pay and prevent big bosses being rewarded for failure".
Companies will still face an annual vote on their remuneration reports, but this will remain advisory.
Last year saw an unprecedented level of dissent over these reports, but big institutional managers have eased their pressure this year.
A spokesperson for voting advisor Pirc said the binding vote was "clearly a good thing, though we would have preferred an annual vote".
"Elements of the enhanced disclosure accompanying the new regs are also good news for investors. In particular we welcome better transparency around efforts to consult with employees when setting executive pay.
"The new regulations ensure we will get disclosure of the maximum that can be paid under a company's pay policy, which makes the new vote a good test for how much shareholders are prepared to pay."
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