DTI under fire over directors' pay rules
MPs have accused the government of pushing through new rules, requiring shareholder to vote on directors' remuneration, which are ineffective and have no legal force.
Trade minister Melanie Johnson claimed Directors Remuneration Report Regulations would tackle the ‘unacceptable’ scandal of high rewards for mediocre or poor performance.
But she was forced to admit the shareholders’ vote, to be published in the annual directors’ remuneration report, and required by all businesses, would be ‘purely advisory’.
Tory MP Nigel Waterson said all the rules would do is create a chance for a row at annual meetings and accused the government of having produced ‘a mouse’.
He claimed shareholders would not even be able to single out particular directors’ packages for criticism because remuneration agreements were ‘already set in concrete’ by the time of annual meetings and the directors concerned would have legal redress if shareholders threw out individuals’ packages.
Liberal Democrat MP Paul Marsden accused Labour of going back on a 1997 pledge to force companies to ‘seek prior and explicit approval for pay decisions from shareholders’.
Marsden said the government’s job was to provide ‘meaningful changes’ to individual directors’ packages.
Tory accountant MP Nick Gibb warned there was danger that companies would comply with the letter of the law and seek loopholes instead of doing what was right.
The trade minister retorted: ‘We are not deviating from our support for the principles-based approach to accountancy’. Rather, she said, a strong opposing shareholder vote on pay ‘would send the board a powerful signal that it would be unable to ignore’.
She also denied there had been a ‘u-turn’ in government policy and said the shareholder vote would affect company policy on future pay deals.
The new regulation was approved without a vote.