Cable: I'll force fat cats to justify bonuses

Business Secretary to give workers a say on bosses’ pay

Nigel Morris,Oliver Wright
Monday 19 September 2011 00:00

Thousands of major companies will have to justify lavish rewards for senior executives and present easily digestible information about their pay, pensions and bonuses, under moves to be announced today by Vince Cable.

The Liberal Democrat Business Secretary will detail plans to give shareholders of Stock Exchange-listed firms transparent information about directors' remuneration, telling his party's conference that he intends to "call time on payouts for failure". Shareholders would also be given greater powers to veto pay deals and appoint workers' representatives to remuneration boards.

Nick Clegg, the Deputy Prime Minister, is attempting to use the gathering in Birmingham to "relentlessly hammer home" the message that the Liberal Democrats are making a difference in government – not just in tackling corporate excess but across a range of policies. The party's ministers want to highlight achievements in raising the income tax threshold, introducing the pupil premium, promoting the green agenda, and reining in the Tories' hardline instincts on Europe, cutting tax for the rich and law and order.

Lib Dem strategists hope to position the party as the "social conscience" of the Coalition but with economic credibility from tackling the deficit. "We'll be saying Labour may care about people but they left the country bankrupt, while the Tories can run the economy but don't have a social conscience," one Lib Dem source said.

Mr Cable will use his speech to promise to tackle Britain's "appalling inequalities of wealth and incomes" as he forces thousands of firms to disclose the total annual income of named board members. They will also have to detail what directors did to qualify for bonuses. The move, to come into force in October 2012, will cover all directors of companies quoted on the London Stock Exchange.

A full picture of executives' salaries, pensions and bonuses will be accessible alongside information about companies' policies for calculating bonuses. Firms will also have to spell out what their directors must achieve in future years to receive their bonuses.

The measures have been prompted by suspicions that large companies can use guaranteed bonuses or inflated pension packages to top up executives' pay. The average remuneration of a chief executive has risen from £1m in 1998 to more than £4m last year. "There is absolutely nothing wrong with generous rewards for those who build up successful businesses and create wealth and jobs," Mr Cable will say. "People accept capitalism, but they want respectable capitalism. I want to call time on payouts for failure."

Yesterday's conference agenda was dominated by attempts to reassure party activists that being in government was worthwhile. Clegg allies say his strategy is to steady the party's nerve in the face of grim opinion-poll ratings. Its predicament is underlined today by The Independent's poll of polls, which shows the Liberal Democrats stuck on 13 per cent support – just over half their rating at the general election.

Mr Clegg denied claims that he intended to stand down from politics at the next election regardless of how well the Lib Dems perform. "I want to see us succeed in the Coalition Government and beyond... I intend to see it well beyond one term," he said. He wanted the Liberal Democrats to be perceived as "a party of the head and of the heart", reflecting a balance between social fairness and economic responsibility.

"If you look at what the country's been through in the last few years... there are millions of people who want a political party that believes you can create a strong economy and a fair society, and don't like being told that you have to choose between one and the other. And that's what the Liberal Democrats are about."

To underline this, Danny Alexander, Chief Secretary to the Treasury, used his speech to conference to announce the creation of a team of tax inspectors to concentrate on the 350,000 people whose personal wealth is more than £2.5m. He promised: "My message is simple: we will find your money and you will pay your fair share."

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