Wednesday 9th May 2012 | 13:59
TUC: Binding votes but more radical action needed to curb top pay
Commenting on government plans announced in the Queen's Speech today to give shareholders more power over the pay of top directors, TUC General Secretary Brendan Barber said:
"A growing number of shareholders have been voicing their unease recently at the astronomical levels of pay being awarded to top company executives. Plans to make these high-profile votes binding in future may help make remuneration committees think twice before putting forward such over-inflated executive pay reports.
"But despite the flurry of shareholder activity, the most that top directors have had to deal with in recent weeks is a few negative headlines - their pay and bonus bonanzas have largely remained intact. Even at Aviva where half the shareholders failed to support the remuneration report, the departing chief executive will still walk away with a 1.7 million severance package.
"But making shareholder votes binding won't be enough on its own to start to rein in runaway executive pay in the UK.
"Alongside strengthening shareholder powers on top pay, the government must also allow workers to sit on remuneration committees. Employee representatives would bring a much-needed injection of common sense into the setting of executive pay and, if the European experience is anything to go by, would help keep directors' salaries in check.
"In addition, introducing a requirement that pay reports can only go through with a 75 per cent approval rating would increase the pressure on companies to stop paying top executives huge salaries and bonuses which bear no relation to the pay of the rest of the workforce, or to the way in which a company has been performing."