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Front: Cut bonuses to restore public trust, Cable urges boardrooms: Business secretary threatens new legislation if companies ignore his pleas(Guardian (UK) Via Acquire Media NewsEdge) Vince Cable last night issued a stark warning to Britain's leading boardrooms that they need to crack down on bonuses to restore public trust and avert the threat of fresh legislation to limit executive pay. The business secretary fired off a warning to the 100 biggest UK-listed companies about the damage big pay deals can have on their image, before Barclays' annual meeting tomorrow, where protests about the bank's pounds 2.4bn bonus pot are expected to be registered by disgruntled shareholders. "Getting pay wrong damages popular trust in business and undermines the duty to promote the long-term success of the company," Cable said, in a letter to directors who chair the remuneration committees that set senior pay at the UK's largest companies. "I therefore think it vitally important that remuneration committees consider how remuneration policies can genuinely support sustainable value creation and avoid creating unwelcome incentives to focus excessively on short-term goals." He added: "At a time when every part of the economy is striving to get more from less, I hope you find yourselves animated by the same spirit." His letter is being sent as the annual general meeting season of leading companies gets into full swing, allowing shareholders to vote on the pay deals of directors. Two years ago, a record number of remuneration reports was voted down by investors. "There is now an opportunity for companies to make peace with the public," Cable said in a BBC interview. These are the first annual meetings since Cable introduced rules requiring companies to give shareholders a binding vote on pay policies for coming years, in addition to the requirement for an advisory vote on the remuneration report that outlines pay deals for the last year. Cable told the heads of the remuneration committees that shareholders had shown their willingness to reject excessive pay deals. "I hope you agree that we need remuneration committees that act in a similarly active, challenging way. It is, after all, how managers up and down an organisation are expected to behave: getting the very most out of employees, for the very best value for money, rather than trying to find ways of paying the most possible," Cable said. It is also the first time that banks are being forced to comply with the European Union's cap on bankers' bonuses, which limits bonuses to one times salary, or twice if shareholders give their approval. This presents a dilemma for the government, which owns stakes in Lloyds Banking Group and Royal Bank of Scotland. Cable had warned FTSE 100 bosses in a speech last month that he planned to send the letter. At the time, he warned that he would consider tougher measures unless their behaviour improved, which he said included stricter regulatory oversight of pay reports and policies, forcing shareholders to disclose how they have voted on pay, or making companies consult their employees on pay. Cable told the BBC that bankers' pay was still "extraordinarily large". In his letter, Cable warns of the risk of new rules on pay. "You will be conscious that this issue continues to be the focus of considerable public debate. Unless business is seen to act responsibly, pressure for further action will inevitably result," Cable wrote. His letter, though, is being sent after the pay deals of Britain's top bosses have already been set and the remuneration committees have already met to discuss bonuses. Barclays, which holds its annual meeting in the Royal Festival Hall in London, is in focus as it increased its bonus pot by 10% for 2013 to pounds 2.4bn despite reporting a 32% fall in profits. This appeared to break a pledge by the new boss, Antony Jenkins, to contain bonuses as part of his efforts to clean up the image of the bank following the Libor-rigging scandal. In response Chuka Umuna, Labour's shadow business secretary, said: "After promising to introduce annual binding shareholder votes on remuneration, Vince Cable and the Tory-led government caved in and have failed to match their rhetoric with action." (c) 2014 Guardian Newspapers Limited. |