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While there is a consensus that "excessive" executive pay must be tackled, pay experts have expressed concern that stakeholders could vote on pay packages without fully understanding a company's remuneration policy.
The discussion follows the Queen's Speech at the House of Lords on May 9, which unveiled measures to help boost the economy. Many are included under the Enterprise and Regulatory Reform Bill, which the Government is expected to bring forward imminently. This will reform director's payby introducing binding shareholder votes.
Reaction to Vince Cable's proposals on executive pay (on the Parliament website) is mixed, with many commentators questioning whether they will lead to any difference in practice. Unions in particular had hoped that the proposals would include introducing employee representation on remuneration committees, but instead the onus remains with shareholders. The TUC said that the proposals have "spectacularly failed to make any significant changes to the status quo", while trade union Unite said the Business Secretary "lacks backbone on boardroom pay". Labour MP Chuka Umunna, who forced the Business Secretary to make his announcement a day earlier than planned, asked why the plans do not "back moves for employees to sit on the remuneration committees that set pay?"
However, some business commentators are more positive, with the Institute of Directors saying that "The Government has done the right thing in rejecting calls for the mandatory inclusion of employees on remuneration committees." CBI director-general John Cridland commented: "Not including employees on boards makes sense. Every good company involves its staff in how the business is doing, but boards must be the representatives of business owners."
The report focuses on the private sector, as the issue of fair pay in the public sector was examined by a Government enquiry headed by Will Hutton, which published its findings in March 2011.