Vince Cable is expected to sanction binding votes on executive awards, changes to boards’ remuneration committees and a radical simplification of pay deals as the business secretary outlines plans on Tuesday to clamp down on soaring pay in corporate Britain.
Shareholder groups, which last week met for a final round of talks with the government, expect Mr Cable to give them a binding vote on pay-outs for departing executives for elements beyond their basic salaries and on share-based incentives for executives.
Investors also expect to be given a binding vote on forward-looking elements of pay deals following a promise by David Cameron this month to bolster shareholder power.
They also anticipate that Mr Cable will prevent executives from sitting on other companies’ remuneration committees and setting each other’s pay, as revealed in the Financial Times.
Investors also see him as likely to focus on pay consultants by forcing companies to disclose who advises them and how much they are paid for such work. Investors believe the business secretary will look at ways of getting staff more involved in setting executive pay – although the government is likely to stop short of putting employees on boards.
The final element of his reform is to boost transparency by simplifying reward schemes and forcing companies to produce a single figure for what their executives are being paid, say government insiders, an idea backed by the CBI employers’ group.
Tuesday’s announcement will cap weeks of political jousting over how to rein in soaring executive pay and high bank bonuses, with all three party leaders seeking to exploit public anger over the disparity between City pay packets and those of other workers.
Mr Cameron last week sought to position himself on the side of the ordinary man as he acknowledged Britain’s loss of faith in free-market capitalism and promised to intervene where markets were failing.
But the coalition is bracing itself this week for another bout of conflict over bank bonuses. Labour is demanding that the prime minister block a £1m-plus bonus for Stephen Hester, RBS chief executive, and will increase the pressure on Monday by calling for an opposition day debate about a tax on bank bonuses.
“We say tax those bonuses, because it is just not fair; it’s not right and it’s not the bankers paying their fair share,” Ed Miliband, the Labour leader, said on BBC radio on Sunday. “I’ll also say, you know, there’s this big decision about RBS. I don’t think [Mr Hester] should be getting his bonus… And the prime minister, if he is true to his word, would exercise his responsibility and do something about that.”
Mr Cameron has so far ducked questions over whether he will block Mr Hester’s pay-out, with Downing Street privately fearful that the well-regarded banker might quit RBS if he is stripped of his bonus, despite hitting targets this year for cutting the bank’s balance sheet, removing risk and selling assets. Mr Hester is in line for a maximum pay-out worth about £1.6m.
Nick Clegg, the deputy prime minister, reiterated on Sunday that cash bonuses at state-controlled RBS and Lloyds would again be set at £2,000 and said he expected the bonus pool to be lower this year.
However, he also admitted that there was little the government could do to stop big pay-outs.
“[The last government] entered into contracts with [the bankers], which allowed them to pay themselves large bonuses. Now, whether you like it or not, and I don’t particularly like it, we are constrained by those contractual obligations,” Mr Clegg told the BBC.