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UK inquiry into ‘alien’ corporate pay

Monday 25 October 2010 - by Andrew Hickley

The UK government is to launch an inquiry into the remuneration levels of “alien” company chief executives, whose salaries and bonuses “occupy a different galaxy”, according to the country’s business secretary.

Speaking at the Confederation of British Industry's annual conference in London on Monday, Vince Cable indicated that an investigation into the “dislocation” between corporate best practice and pay awarded to managers should insist that levels “return to Earth”.

Cable said: “Perhaps it is time to return to Earth. The best way to achieve this is surely to strengthen the relationship between shareholders and the managers they are paying. It is, after all, their money.”

While urging against “another self-indulgent bonus round”, the minister stated that it is “essential” to look at remuneration policy to better align bankers’ interests with customers and staff.

Cable noted that although the FTSE 100 fell by 3 per cent between 1998 and 2008, chief executives’ salaries had risen by 15 per cent.


“We want to ask whether shareholders are being told enough about the basis on which managers are paid, and whether they should have a binding vote on practices that may be against their interests,” he continued.

The investigation will focus on pay levels, corporate governance and takeovers, he said.

Cable also criticised short-termism in banking, suggesting that the short-term approach had proven itself to produce shocking results.

He also recalled the mantra of late Lloyds Bank chairman, Sir Brian Pitman, who said that a bank “should be run for its shareholders”.


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