My Lords, the Government have access to a wide range of statistics about remuneration and have two reviews taking place in this area; the Department for Business, Innovation and Skills' call for evidence, A Long-term Focus for Corporate Britain, and Will Hutton's independent fair pay review. The Government will take further decisions following the conclusion of these reviews.
My Lords, I thank the Minister for that helpful reply and note the initial steps, which are really quite good, in dealing with bankers' pay. Is she aware, as I suspect she is, that the remuneration ratio of FTSE 100 chief executives' pay and employee pay is currently well over 100:1 and that a recent figure I saw was 128:1, and that the gap has more than doubled in the past decade or so? Do the Government have any plans to deal with this problem which is socially divisive and where the increases often bear no relationship to profit performance? Will the Government require public companies to publish this key ratio in their annual reports so that the public, employees and shareholders can know the facts?
My Lords, I am aware of the growing differential over the past 10 years in the pay of chief executives, executives and employees. The noble Lord will expect me to comment on the fact that this occurred in the decade of the previous regime and we inherited it. We are now looking very carefully at how we can get fairness into this. Excessive differentials are not helpful. At a time of challenging economic conditions, it is important that the focus is on linking rewards to growth.
My Lords, I find myself very much in line with the noble Lord, Lord Donoughue, on this. Does my noble friend agree that the prime interest in this matter lies with the shareholders of the FTSE companies? Is it therefore not reasonable and sensible to require in law that quoted companies compare the total remuneration of their chief executive with the average wage of their workers, and do that in their annual report which everyone can read?
My Lords, we are in the middle of discussions about these very subjects. They are areas that have been under review for quite some time. Some people ask that shareholders should have separate votes, and some people ask the Government to intervene in all sorts of ways. There are ongoing discussions, particularly about the role of remuneration committees. I emphasise that it is for shareholders to go to shareholders' meetings and say what they think.
My Lords, I was for many years a member of the Royal Commission on the Distribution of Income and Wealth which looked at data going back to the 19th century. We are now going back to the 19th century in so far as we had these ratios certainly before the First World War. Although it may be said that the gap occurred under a Labour Government-and some of us raised this question then-do this Government think it is satisfactory that it continues to grow, rather contracting?
I suppose what the noble Lord is really asking about is directors' pay and fairness. That is where we all are now. I think we would all agree that there must be a robust link between the pay of those who run companies and the performance of those companies; that rewards for failure are not acceptable; and that exceptional rewards for mediocre performance are not in anybody's best interest. I can assure noble Lords that this Government are very interested in making sure that companies are run well and that there is fairness in distribution on the payment for everybody in a company.
My Lords, in the previous Parliament, the noble Lord, Lord Gavron, introduced a Bill, widely supported on all sides of the House, that provided for publication in the annual report of public companies of the ratio that the noble Lord, Lord Donoughue, talked about. Would it not be a very simple matter for the Government to introduce that Bill? It would be a very effective way of naming and shaming.
My Lords, before I came to your Lordships' House today to answer this Question, I rather thought that this question was going to come from the noble Lord, Lord Donoughue, who commented greatly on the Bill introduced by the noble Lord, Lord Gavron, when it was debated in 2009. The question on that Bill, which will fit with the questions I have been asked now, was: should the AGM meeting vote on the directors' remuneration report be binding instead of advisory?
On the publication of information. At the moment, we are going through this again with the first report to which I referred, A Long-Term Focus for Corporate Britain. I shall be reporting on this just before Easter.
We shall look at this carefully. I do not think anything is beyond review. I am very happy to look at anything and I am not afraid to either, so I am delighted to answer your question.
My Lords, the noble Baroness has said that she is concerned about a widening gap. I want to refer to the agricultural sector. If the Minister is concerned about such a gap, why are the Government proposing to abolish the Agricultural Wages Board which provides some protection against the exigency of the wage structure in that sector for very low-paid and vulnerable workers?
My Lords, the noble Lord will know that that is an entirely different Question, but I am delighted that he took the opportunity to air it.