I welcome this opportunity to set out the Government’s proposals for directors’ pay. This follows extensive consultation with business and the investment community.
Since I first addressed the House on the issue, the Government have initiated a broad, national debate about shareholder activism, and this encouraged shareholders to become more engaged as owners of their companies during the so-called “shareholder spring”. We have also seen many companies engage constructively in the face of that opposition, and this is an important step in encouraging improved pay discipline.
There is, as I said then, compelling evidence of a disconnect between pay and performance in large UK-listed companies, and it is right that the Government act to address that market failure. Today I can therefore announce a far-reaching package of reforms that will strengthen the hand of shareholders to challenge excessive pay while not imposing unnecessary regulatory burdens.
We will give shareholders new powers to hold companies to account on the structure and the level of pay, and make it easier to understand what directors are earning and how that links to company strategy and performance. So shareholders will have a binding vote on a company’s pay policy, including their approach to exit payments, and, rather than being a one-off vote, for the first time there will be a real, lasting and binding control on pay.
A company will be able to make payments only within the limits that have been approved by a majority of shareholders, and this binding vote will happen annually unless companies choose to leave their pay policy unchanged, in which case the vote will happen a minimum of every three years. This will encourage companies to set out and stick to a clear, long-term pay strategy, and it will put a brake on the annual upward pay ratchet.
The policy should explain clearly how pay supports the strategic objectives of the company and include better information on how directors’ pay relates to that of the wider work force. There will be increased transparency on employee pay, including information that will show the difference between rises in directors’ pay and that of the employees. Indeed, employee views on pay are important. That is why I am proposing that companies report on whether they have taken steps to seek the views of their work force. As part of their policy, companies will have to spell out their approach to exit payments. When a director leaves, the company must publish a statement explaining to shareholders exactly what payments the director has received, and companies will not be able to pay more than shareholders agree.
Alongside the binding vote on pay, there will, as now, be an annual advisory vote on how the policy has been implemented, including all remuneration paid in the previous year. If a company fails the advisory vote, that will automatically trigger a binding vote on policy the following year. Both the binding and the advisory vote should be as strong as possible to keep up pressure on companies. I therefore welcome the CBI’s call for the Financial Reporting Council’s corporate governance code to be updated to codify current best practice whereby companies make a statement when a significant minority of shareholders vote against a pay resolution. This will publicly hold directors to account. Pay reports will be clearer and more transparent for investors. Companies will have to report a single figure for the total pay that directors received for the year, details of whether they met performance measures, and a comparison between company performance and chief executives’ pay.
The Government will shortly bring forward amendments to the Enterprise and Regulatory Reform Bill to introduce these reforms. In tandem, as good policy-making requires, we will publish for comment revised, simplified regulations setting out what companies must report on directors’ pay.
Lasting reform is dependent on business and investors maintaining this activism and developing and adopting good practice. The best companies and investors are already leading the way and acting as early adopters of these reforms. We welcome the close engagement of institutional shareholders and their willingness to use their voting powers. We want this to be sustained and we shall continue to monitor disclosure levels. Evidence suggests that more institutional investors are disclosing their voting records and that up to three quarters of these investors are now disclosing their votes. We will consider further action if the number of investors volunteering to disclose their voting records does not continue to increase.
In summary, this is a strong package of reform. It builds on the UK’s status as a global leader in corporate governance, it commands wide support from investors and business, and it addresses public concerns about directors’ pay. These proposals restore a stronger, clearer link between pay and performance; reduce rewards for failure; promote better engagement between companies and shareholders; and, overall, empower shareholders to hold companies to account through binding votes. We look forward to discussing the proposals further with the Business Innovation and Skills Committee on
I thank the Secretary of State for advance sight of his statement.
In the past decade, the value of FTSE 350 companies increased by 80% while the average total earnings of executives in those companies increased by 108%. So the evidence is clear: many of these rewards, as the Secretary of State said, are not linked to success or performance. This problem has grown over the past few decades under Governments of all persuasions. In fact, one has to go back to 1979 to find things more in proportion, with executive pay growing by 0.8% on average in the three decades since that year. It is imperative that we all do what we can to address this problem.
In government, rightly, we did not rush to legislation. It was right to see whether legislation could be avoided. When it became clear that that was not the case, in 2002 we made it mandatory for quoted companies to publish a separate directors’ remuneration report, and we gave shareholders the right to vote on remuneration through advisory votes. As the Secretary of State said, shareholders, to their credit, have been exercising those rights with some verve this year. That is very welcome, because change and reform must be led by them.
The Secretary of State outlined a number of proposals to assist shareholders in that endeavour. I welcome the binding vote on exit payments, the measures to simplify pay reports and the measures to increase transparency, but I have a number of concerns and questions in relation to the other things that he mentioned.
First, on the annual binding vote on future remuneration policy, it is deeply disappointing that having marched us all up the hill, the Secretary of State appears to be marching us back down again by performing a U-turn on his original proposal. Having proposed an annual vote, he now seeks one every three years, unless there is a change to the policy during those three years. Will that not incentivise boards to draft policy as broadly as possible to avoid anything other than a triennial vote? Exactly how does he define a change to remuneration policy? Who will be the arbiter in each company as to whether a change has occurred—the board or the shareholders? I know that bureaucracy has been raised as an objection to an annual vote, but given that there are many other annual votes, I am not sure whether that holds water.
Secondly, the Government should have been bolder on the majority that is required for a pay policy to be approved and gone for a 75% threshold, as opposed to a simple majority. Dominic Rossi, the chief investment officer of Fidelity Worldwide Investment, has said that such a threshold would
“ensure that companies consult widely with shareholders prior to a vote.”
He went on to say that it would give
“companies a clear mandate and the need for a clear majority also encourages all shareholders to express their views”.
Why does the Secretary of State not take heed of that advice?
Thirdly, the Secretary of State says that employees’ views on pay are important. If that is the case, why does he persist in standing in the way of the requirement for employee representatives to sit on board remuneration committees?
Fourthly, we fully support the introduction of an annual advisory vote on how remuneration policy has been implemented over the previous year. The Secretary of State said that the loss of such a vote would
“automatically trigger a binding vote on policy the following year.”
Will he clarify to which vote in the following year he was referring—the backward-looking vote that would usually have been advisory or the forward-looking vote on policy?
Finally, I too welcome the CBI’s call for the Financial Reporting Council’s corporate governance code to be updated. Will the Secretary of State consider requiring the FRC to produce an annual report on the operation of the UK stewardship code to keep shareholder activism and good pay and remuneration practices high on the national agenda in the years to come? It would be a great shame if it fell off the agenda.
I thank the hon. Gentleman for his positive comments. It was useful that he started with a bit of history. It is worth recalling that in the 13 years of Labour Government, seven Secretaries of State occupied my job—eight if we include Lord Mandelson twice. In the seven years that followed the introduction of advisory votes, none of my predecessors thought it necessary to introduce a binding vote on pay, despite there being, as the hon. Gentleman acknowledged, a continuing trend for top pay to diverge from the performance of companies, let alone from the pay of employees.
The hon. Gentleman continues to raise the issue of workers on boards. I think that having workers on boards is an excellent idea. The question is whether it should be mandatory. If it was such a good idea, why did none of my predecessors do anything about it? Most of them were nominated by trade unions and one was a distinguished general secretary of a trade union. None of them took any action to implement the measure that the hon. Gentleman is demanding. I welcome employee participation and will expect a report back from companies on whether they have consulted their employees on pay.
There will be an annual vote if pay policy changes. The hon. Gentleman seems to find a problem with the idea that if nothing changes, a policy can last for a three-year period. I would have thought that he would see the obvious attraction of a system that encourages companies to think long term. As I understand it, he has just copied my example in setting up a report on long-termism. We want companies to think long term. Should they choose to use the three-year process and leave their policies unchanged, it would put a stop to the ratcheting of annual pay awards. That process would be a considerable improvement should companies choose to use it, but for the most part, as I have indicated, the vote will take place annually.
I personally believe that it would be desirable to have a 75% vote threshold in the advisory votes, and the FRC will pursue the requirement of a statement to the market. As the hon. Gentleman will know, the FRC is an independent body, and I do not mandate it, but I believe that having a higher threshold would be desirable in that case.
The hon. Gentleman specifically asked what the FRC was doing to strengthen overall corporate governance. It is pursuing investigations on a variety of issues such as how companies should formally respond when a significant minority oppose a pay vote, requiring all companies to adopt clawback mechanisms and the extent to which executives should serve on remuneration committees in other companies. Those are big issues, and subject to the FRC’s recommendations we will have considerable improvements in the corporate governance system.
These are radical changes, and I would have thought it would enhance the hon. Gentleman’s reputation if he was gracious enough to acknowledge that a major set of reforms has been undertaken.
Banks have taken excessive risks, for which we have all paid. The Treasury Committee is now investigating that and has heard extensive evidence that senior bank executives have been rewarded excessively for taking those risks. What in these proposals specifically addresses the problem of systemic risk in our major financial institutions?
As the hon. Gentleman knows in his important role as Chairman of the Treasury Committee, a separate set of regulations introduced by the Financial Services Authority deals with the link between the types of pay package that are introduced and systemic risk. Excessive bonusing has undoubtedly had an effect in the past, and learning from the experience of the financial crash, those regulations have been tightened. Banks, as public limited companies, will be governed by the new regulations, and I imagine that after their experiences shareholders in our leading banks will want to ensure that forward-looking pay policies take proper account of the systemic risk of their institutions.
I broadly welcome the Minister’s statement and I welcome his agreement to appear before the Select Committee on Business, Innovation and Skills on
I have already indicated in my statement that we are examining disclosure levels. There is an encouraging trend towards disclosure, and as the hon. Gentleman knows, the big weight of votes comes through the big pension and insurance companies. I have said that we will consider further measures if the current ones do not lead to the right trajectory, and his point is a useful one.
I very much welcome these proposals. The three-year binding pay policy will help to constrain the constant upward spiral in directors’ pay increases that we have seen in recent years. It has been suggested that the three-year pay policy agreement may turn out to be deflationary as growth improves in the economy and, hopefully, in companies. Does my right hon. Friend agree, and would he welcome that?
My hon. Friend is right, and that was one point that institutional investors made when we consulted them. They saw that the option of having a three-year unchanged policy would be helpful in deflating top pay. She is right that the problem that we are dealing with is an upward spiral in which pay is often unrelated to performance and top executives are trying to get into the top quartile, where by definition they cannot all be.
Is the Secretary of State not singing a different song from the one that he used to utter from the seat where I am now? He used to talk about the balance between people on both sides in business—the trade unions and the bosses. Is the truth not that he has come here with a set of proposals that might have been okay some time ago, but that he has been tied hand and foot by the Tories in the coalition and even got rattled by being asked a few decent questions by the pleasant shadow Business Secretary? What a transformation.
As for my performance when I used to sit in the seat where Mr Skinner is now, I did indeed warmly welcome Patricia Hewitt’s changes seven years before the end of the Labour Government. They were a big step forward, and they were helpful even though taken as a whole they were quite a weak package. What is happening today builds substantially on those proposals.
The Secretary of State’s proposals are unnecessary and will just be an additional burden on industry. Should he not concentrate instead on his day job? Gallay Ltd, in my constituency, has been waiting since February for an export licence and will lose an order to the Americans. Should we not have more action and less stunts?
If there is a genuine problem with export licensing, I will be happy to address it, but only a very small proportion of exports are covered by the licensing regime. As the hon. Gentleman will know, they cover defence and national security, and it is important that we are careful in how—
Order. I am sure the Secretary of State is going to mention directors’ pay as well.
I welcome much of what the Secretary of State said, but the proof of the pudding will be in the eating. What difference will the changes make to the so-called directors—I call them the vermin—of the private equity world who took over Boots the Chemist five years ago and have now sold it off to the Americans? Will he announce how much money they have screwed out of this deal?
This change deals with public listed companies, not with private equity. There is a whole set of separate issues to consider about the regulation of private equity companies and about tax policy, but this change is about public listed companies.
I welcome my right hon. Friend’s taking a reasonable approach on directors’ pay following consultation with business and investors. Does he believe that more power for shareholders and greater transparency will encourage more people to participate in companies’ meetings, get involved and buy company shares? That is surely what we all want—more shareholders and more involvement.
That is absolutely right, and I congratulate shareholders who have become actively engaged in issues of pay policy for the first time in many years. I think one reason why they have been active is that they knew legislation to cement their position was coming.
The Secretary of State was quite right to castigate previous Governments for their complacency on top pay, which is now not simply a practical issue but a moral one. However, if he is honest I think he knows that his statement was timid.
Is it not time that we had a high pay commission to consider how we begin to dismantle the obscenely high pay of the top-paid at a time when the poor are getting poorer?
I have seen the work of the existing High Pay Commission, which I think is a voluntary body and which has made some good suggestions, many of which we have taken on board. If the community of investors, think-tanks and others were to come together to examine top pay, I would look with great interest at what it suggested.
I welcome the Government’s announcements on executive pay, especially after a decade of runaway executive pay. Does my right hon. Friend agree that it is imperative that board members understand that what they do has to be in the interests of not only employees, stakeholders and shareholders but above all else the long-term sustainability and well-being of the business, operating by ethical means?
The hon. Lady is absolutely right—that is what the corporate stewardship code is all about. That initiative goes hand in hand with the others we are taking to ensure that companies operate on a long-term basis. British business has been undermined for far too long by short-term decision making, and we are trying to move it in the opposite direction.
I broadly welcome the Government’s proposals, but on a practical matter, if a company were to default or not implement the legislation, what penalties could the Government impose on them?
There is already a set of rules under the stewardship code. If companies fail to observe the binding vote, they will be making unauthorised payments. Very considerable liabilities can accrue to directors of companies that do that.
I welcome the statement, and the Secretary of State is right to tackle rewards for failure. Surely the worst example is that of Enterprise Inns, which suffered a 96.6% decline in share values over five years. Over three years when share values declined by 80%, Ted Tuppen, the chief executive, thought it fit to reward himself £850,000 in performance-related bonuses. Does my right hon. Friend agree that shareholders are only part of the answer? Thousands of businesses are being damaged by the pubco model, so will he pledge to uphold the will of Parliament and announce a review in the autumn? As everyone in the industry knows, the imbalance in that sector has not been changed by the so-called self-regulatory solution.
The Minister who formerly had responsibility for pubs, who is now Secretary of State for Energy and Climate Change, had extensive debates with my hon. Friend on Enterprise Inns and the damage that the pubco model has done. The figures my hon. Friend produces are striking. I cannot understand why shareholders are not more active if there has been such a divergence between pay and performance. Perhaps he, with his formidable campaigning skills, will help them to be so.
I thank the Secretary of State for his statement and early sight of it. He says: “Pay reports will be clearer and more transparent for investors.” Investors in large listed companies have the capacity to do such work, but has he no concerns about the potential unintended consequence that business investors will see that burden as a de facto requirement of any business in which they seek to invest? Is he not concerned that there might be too much work involved for smaller businesses that are seeking investment to grow?
That is a perfectly correct statement of the balance we are trying to strike. We want investors and shareholders to be actively involved. In order to be so, they need to know what is going on and to have other information. I fully acknowledge that indirectly that has some regulatory impact. We have tried to strike the correct balance, and I believe we have done so.
The Secretary of State is right to identify the deep public distaste not just for rewards for failure but for general rewards for those who are not in any meaningful way risk-takers or entrepreneurs. How will he judge whether the policy has been a success over the next three years? When we are sitting here in June 2015, on what basis will he see today as a success?
The hon. Gentleman is right to stress that we are talking not just about reward for failure but about the general escalation of the pay of top executives unrelated to company performance. It is not likely that we could produce a simple metric of how the policy will work through, but if annual or tri-annual reviews of policy are successfully implemented across companies, with well informed shareholders exercising their votes, I think that in a few years’ time we will see a good deal of restraint and more strategic thinking in the setting of pay policies. That is what we are trying to achieve.
Three years is an awful long time to pack in share options, mega-bonuses, huge share handouts, long-term incentive pay schemes and so on. Why not have an annual binding shareholder vote to stop top executive remuneration ballooning wildly out of control within a three-year grace period?
Even if that perverse behaviour were to occur, there would still be the existing annual backward-looking advisory vote. If shareholders are dissatisfied, the company, subject to the Financial Reporting Council’s work, will be required to issue a statement, which will require a binding vote the following year. Checks and balances are built into the system to ensure that the abuses the right hon. Gentleman describes simply do not happen.
Does my right hon. Friend agree that there is a vital role for remuneration committees, and particularly their non-executive members, in re-linking rewards with positive performance in companies throughout the country?
Yes, there is an important role for remuneration committees and the consultants who advise them. One thing I did not mention was the effort being made to ensure that fees for remuneration consultants are properly declared, so that there is more transparency in that aspect of the process.
I welcome the statement, not least because I proposed an amendment to the Finance Bill to the effect that we should introduce a binding vote. I appreciate that the Government were consulting during that period. However, the shareholder vote is a binary vote—a straightforward yes or no. Does the Secretary of State envisage a process in which shareholders can amend the pay policy, for example to introduce a ratio between the highest and lowest paid within companies?
It will be possible for shareholders’ representatives to work out the ratio because of the information that will become available. We suggested that it would not be sensible to make that metric compulsory, because it can be misleading. I have previously described to the House the anomalies that can arise. A company with a large number of low-paid employees would have a big ratio, but a company that has outsourced such employees, which might be less socially responsible, will none the less have a better ratio, for entirely artificial reasons. We do not attach overriding importance that measure, but the hon. Gentleman is right that it should not simply be a question of saying yes or no. Shareholders must engage with the company should there be a failure to pass a binding vote to produce a more satisfactory outcome. That is a process, not simply an event.
I would be grateful if the Secretary of State could elaborate on the concept of long-termism that he has mentioned in a few of his replies. I ran a business for 20 years before I came to the House, and the best decisions I made were long-term ones. Only when we take a long-term view will we tackle mediocre performance head on.
The hon. Gentleman is absolutely right. The big issue is essentially a cultural question—the evolution of business in the UK over a long period is central. That is why I set up the review under Professor Kay, which was supported by Sir John Rose and others. That will report in July. Some of its proposals—on, for instance, an end to quarterly reporting—will emerge in detail shortly.
While millions of people are trying to make ends meet—far more than under the previous Government—why should we believe that the massive annual sums, amounting to millions of pounds, given to the heads of the banks and other organisations are likely to change? We are in an unfair society, and there is no indication that that will change in any way as a result of what the Secretary of State has told us.
The proposal is not designed to solve all the problems of income and wealth distribution in society; it is designed to ensure that public listed companies operate responsibly, and that they are properly policed by their shareholders. The wider questions the hon. Gentleman raises involve tax and other policies, which I am sure we will debate on many other occasions.
The measures in the Bill on the binding vote are strong ones. Whether they are implemented quickly enough depends partly on how quickly the House proceeds with the legislation. I would expect to see it coming into effect soon.
In welcoming the Secretary of State’s statement, may I caution against weather presenters claiming credit for the spring? On the three-year binding pay policies reported by institutional investors, will he ensure that they will not have elasticity and undue headroom built in? He recognises that there will be changes in the Enterprise and Regulatory Reform Bill, but on institutional investors does he envisage the possible need for changes in the Financial Services Bill?
We are not proposing changes in the Financial Services Bill. Whether there is elasticity in the policy will depend on the shareholders: they own the companies and make the judgments, and they will ensure that the powers we are giving them are enforced in their companies.
On credit for the shareholder spring, I think the prospect of legislation has probably helped, although I would not claim credit for it. By passing these measures, however, we will ensure the spring is not a one-off event but is sustained; that is the purpose of what we are doing.
I very much welcome the Secretary of State’s measured proposals to give shareholders, who after all own the businesses in which they have shares, greater control over top pay. Further to the question from my hon. Friend Mr Evennett, does the Secretary of State agree that the best way to increase shareholder activism is to increase the number of shareholders, especially non-institutional ones? What measures are the Government taking to increase the number of private, non-institutional shareholders?
The hon. Gentleman is right to stress the point that shareholders own the companies. That is self-evident but often overlooked, and they have often been treated as outsiders. Clearly, widening shareholding would be desirable, and we are considering a variety of ways of doing that, not least through encouraging employees to have shares in their own company. The Under-Secretary of State for Business, Innovation and Skills, my hon. Friend Norman Lamb, and I will consider how to effect that in one of the companies for which we still have direct responsibility—the Royal Mail.
There is growing evidence that a major contributor to the ratchet effect on directors’ remuneration is the role of remuneration committees. People are concerned about the very narrow base from which remuneration committees are drawn, and there have been recommendations to widen their membership. The Secretary of State has already indicated his support for having an employee on remuneration committees. If he does not make that mandatory, will he make mandatory a wider base from which to draw the membership of remuneration committees?
I take the hon. Gentleman’s broader point that diversity among directors is critical to changing the culture of companies. At the moment, we are focusing on women on boards of companies, on which significant progress has already been made. That is part of the wider picture of having more diversity, and more employees, among directors.
A large proportion of the population has a direct or indirect stake in the stock market. Does the Secretary of State believe that there is a link between the relatively poor performance of the stock market over the past 10 years and the increasing share of corporate wealth taken out by directors and senior managers?
It is precisely the divergence between those two things that we are endeavouring to correct. My hon. Friend’s point is certainly true of the banking system, where very large salaries and bonuses have come at the expense of dividends. These reforms should help to correct that.
Today’s measures are welcome, but it should not just be a question of trying to stop the upward spiral of excessive directors’ pay; something needs to be done about the current excesses. When this measure comes into effect, will the Secretary of State urge companies to consider existing levels of directors’ pay? If that does not deal with the existing excesses, will he consider returning with other measures to drive them down?
There is an important distinction between existing pay arrangements, which are governed by contract, and future pay policies, which will be the subject of binding votes, after which those contracts can be set on a fresh principle. There is a restraint on existing pay through the advisory vote, and, as I have set out, I envisage the disciplines around the advisory vote being strengthened by the statement, subject to the operation of the Financial Reporting Council.
When an employee and union representative at ITV in Leeds, I was dismayed to see the then boss of ITV, Charles Allen, receive millions in pay, perks and bonuses, while making a series of catastrophic business decisions that brought the company to its knees and saw the share price plummet. I am also dismayed to see that he is now sacking workers at Labour party headquarters. Does my right hon. Friend agree that work forces’ views on executive pay should be considered?
They should be considered. If my predecessors had been as active as this Government have been in bringing forward this legislation, the Labour party would probably not be facing these redundancies.
I am frequently accused of socialist tendencies by colleagues behind me, but the promotion of shareholders is a rather strange definition of socialism. There is not a shred of evidence to suggest that this will promote the outward movement of companies. Indeed, all the leading business associations and investor groups have welcomed what we are doing.
I have identified that problem. It is particularly a problem in banks, where the so-called code staff, including traders, are sometimes paid more than their directors. That will be covered by the regulation on financial services, which is being strengthened in that respect. There are probably very few public listed companies outside the banking sector where the phenomenon the hon. Gentleman describes is real.
I will happily give the hon. Gentleman more information on the detailed work done on the rules governing transparency in that sector. His point about executive search agencies is a new one—I had not encountered it before—and we will certainly consider it, but the principle of greater transparency is absolutely right.
Will my right hon. Friend assure the House that the Government, as a major investor in some of the country’s largest banks, will be a proactive investor and ensure that rewards reflect results in those banks?
As my hon. Friend knows, the banks are governed by an arm’s length arrangement, through United Kingdom Financial Investments Ltd, but he will have seen that the pay and bonuses of senior executives, particularly at RBS, in the last season reflected the Government’s concerns about excessive pay in general.
Will my right hon. Friend confirm that high-performing individuals in successful companies that perform within the proper corporate governance have nothing to fear from these proposals, but that those companies that do not follow best practice clearly do? Are the Government proposing guidance on what would be best practice?
Guidance will be issued, particularly on what needs to be disclosed and how the legislation will be implemented. The starting point of the hon. Gentleman’s question is absolutely right. To make it clear, we have no objection to people being very well rewarded if their companies perform well. We want to see rewards for success.
I draw the House’s attention to my entry in the register of interests as a non-executive director of an alternative investment market-listed company. The Secretary of State is absolutely right to focus on the long-term perspective of compensation and to opt for a three-year, rather than a one-year, binding vote. Will he also emphasise another point about company performance? Often, the issue is relative company performance. When times are good, it is good for a chief executive officer to reflect, particularly in their equity performance, that their company is doing well, because all companies are doing well. I think, however, that the Secretary of State’s aim is that the best companies, doing comparatively well, should be better rewarded. Will he comment on that?
That is a helpful point that is emerging from the study on long-termism, the analysis of which shows clearly that people’s overriding motivation in respect of remuneration changes with relative performance, but what actually matters is absolute performance.
Thank you, Mr Deputy Speaker. I welcome this announcement, because power going to the shareholders and the business owners is how capitalism is supposed to work, yet it is essential that shareholders are able to exercise their votes in practice. Will the Secretary of State tell the House what action he has taken to ensure that brokerages communicate to their nominees—shareholder-owners—the fact that they have the right to vote at board meetings and are able to exercise it? What action he will take to address stock lending, which is all too often used to steal away votes from the real owners so that other people can use them instead?
We are not taking specific action on brokerages, but it is clear that the increasing participation of shareholders reflects good practice and a favourable trend. To address the hon. Gentleman’s introductory comment, we are talking about capitalism working well and working properly, so perhaps he could have a word with his colleague sitting behind him—Mr Chope—about the difference between capitalism and socialism.