My Lords, the Government believe that executive remuneration which is well structured and rewards long-term success is an important way of promoting sustainability and growth. However, there are justified concerns about the disconnect between how our largest listed companies perform and the rewards that are on offer, particularly at a time of economic restraint. We feel that that is unsustainable. That is why the Government have published a discussion paper that explores these issues and invites views on what can be done.
My Lords, does the Minister accept that our top executive pay has gone up by nearly 50 per cent while that of the rest of the population has gone up on average by 2.5 per cent, and that this is deeply offensive to many people who feel that the bankers and others who caused the crisis are now exploiting us? Does the big society not require consent? In the absence of consent, there is a threat to our social cohesion.
Concern over this is coming not just from Government but from investors, business groups and captains of industry, who have all told us that this is a problem that needs to be addressed. Business should be a force for good but, understandably, figures showing soaring executive pay are causing resentment towards large companies. We want to see transparency, proper accountability to shareholders and a sense of responsibility from British boardrooms.
My Lords, would the Minister consider supporting a Bill that would require the chairmen of publicly quoted companies to announce to shareholders regularly, at their annual general meetings, the average wage of the 10 best paid employees, including directors, and the 10 least paid? Might that not bring back some sense of reality?
My Lords, these sorts of suggestions are exactly why the Government have published this discussion paper. By the end of this month, we hope that we will have received all sorts of ideas so that we can come up with some really good suggestions to make for a better balance going forward.
My Lords, I have experience of corporate boards and was for a number of years the chairman of the remuneration committee of a major multinational, Vinci. Is it not the case that the present position on top executive pay is highly unsatisfactory, utterly unedifying and a threat to the good reputation of our market economy? Most sensible people would totally exclude either statutory regulation of pay or penal taxation as a solution, but simply making speeches, publishing discussion papers or trying to use moral suasion with institutional investors does not seem to get anywhere at all. In that context, may I put two specific practical suggestions to the Minister? One is that we place a statutory duty on public companies to publish the criteria and rationale for their decisions on top executive pay. The second is to adopt the French practice of having two elected representatives of the employees as a whole on the board of every publicly quoted company. Additionally, at least one of those representatives should be on the remuneration committee.
I am interested to hear the noble Lord's tales of being on a FTSE 100 board. I, too, have been on a FTSE 100 board, so like him I have also served on a committee. We all know that there are problems and that things are not right. The question is how we put it right without damaging Britain's competitiveness. Those 100 top companies employ so many people and it is very important that we get this balance right. As to his suggestion of worker representatives on company boards in the United Kingdom, we will of course look at this, in the same way that we will look at everything else in the consultation. We would be only too delighted if the noble Lord writes in and makes sure that his views are known on the record.
My Lords, have the Government considered the evidence that the greater the inequality in remuneration, salaries and wages in a society, the greater there tends to be a great underclass in that society, which the prison population amply demonstrates? Any addressing of the issue has to take that into account.
My Lords, the Prime Minister himself has expressed concern about this growing divide. He feels that it is wrong for our country and does not make for a happy country. It is so important that we look again at encouraging the very big companies to make sure that there is transparency, accountability and responsibility in boardrooms today.