Public Limited Companies (Financial Regulation)

Part of the debate – in Westminster Hall at 2:30 pm on 13th March 2003.

Alert me about debates like this

Photo of John McFall John McFall Chair, Treasury Committee 2:30 pm, 13th March 2003

I can use an analogy involving the Conservative party. At the time of Sir Alec Douglas-Home, Macmillan and others, men in grey suits appointed Prime Ministers. When someone left the post, a new man took over when a man in a grey suit said, "Go!" The Conservative party has changed its practice, and I assume that the hon. Gentleman himself would not have been selected without a formal interview. Why can chief executives not have formal interviews? Only 4 per cent. of them have formal interviews. Let us get into the real world. The Conservatives have started to get into the real world—I am not saying that they have fully got there. I say to business, "Get yourselves into reality. Come into the 21st century."

My hon. Friend Dr. Palmer referred to executive pay and efficiency. I shall refer to some of the directors of FTSE 100 companies who were paid more than £1 million last year. Ken Berry was fired from EMI with £6.1 million for failing to find new acts. I would love to fail to find new acts if I could be given £6.1 million. British Sky Broadcasting was the fifth worst performer in the survey to which I referred, but Tony Ball received £7.8 million. Sir Peter Bonfield left BT as a failure and received £3.74 million. The link between executive pay and efficiency is important when considering not only fairness but efficiency, because we want good, well managed companies with better growth and a better standard of living for our citizens. We do not get that because the interests of consumers and society are not best served by the present situation.

I suggest to my hon. Friend the Financial Secretary that what we have done is helpful to the Government. We are asking her and her fellow Ministers to stand firm because the proposals are sensible and voluntary, not mandatory. I am the first to agree that some of the proposals made by Higgs, although sensible, are hardly perfect—for example, the chairman being unable to take part in the nomination committee—but such matters could be reconsidered.

First, non-executive directors could constructively challenge company strategy for the medium and long term. That must be good. Secondly, they could scrutinise performance of the board and the company as a whole. Thirdly, post-Enron and mindful of Sir Howard Davies' rhetorical question, they could ensure accurate financial information. Finally, they could ensure that executives were paid appropriate rewards, which would be good for companies and society.

I finish by referring to the world's second richest man, Warren Buffet. He castigated the boardroom bad apples in his letter a few days ago and stated that those otherwise decent people simply followed the career path of Mae West, who said:

"I used to be Snow White . . . but I drifted."

Let us put down an anchor to ensure that there is no further drift, to improve corporate governance and to make a better City, a better economy and a better future.