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.
Does Darwin's theory apply to taxation? Colin ponders...
The EC has been instructed to draft a European Union (EU) directive authorising an EU financial transaction tax, which would apply to ten of the EU’s 28 member states
Accountancy watchdog the FRC has dropped its investigation into the former chief financial officer of Tesco, nearly two years after the supermarket was engulfed in an accounting scandal
Colin imagines how Apple's logo might change in the wake of the EC's ruling over its Irish tax arrangements