Hewitt issues warning on fat cat pay

Speaking on the BBC’s ‘Today’ program this morning, Hewitt said: ‘Business leaders who deliver big successes are entitled to big rewards.’

But she warned: ‘There should be no reward for failure.’

She added: ‘When workers are losing jobs and investors are losing money, then company directors should be sharing in the pain.’

Ministers are furious that fatcat bosses can rake in millions of pounds in bonuses while their firms profits, workforces and share prices tumble.

And even those who have are forced to quit can get lottery style payoffs when they leave. Hewitt has warned that company bosses could no longer expect to reap such rewards no matter how badly their businesses are performing.

But she stopped short of advocating government intervention in determining executive pay and said this should remain the ‘role of shareholders’.

The cabinet minister is alarmed at recent huge pay offs to Marconi Chief Lord Simpson and Rail boss Gerald Corbett which said were ‘pretty unacceptable’.

Hewitt is considering the issue as part of the current company law review which will result in a consultation paper which is likely to include greater restrictions on the length and nature of directors contracts and to give shareholders a greater direct say in bosses remuneration.

During today’s radio interview, Hewitt said the issue of worker representation on remuneration bodies at large companies would also be considered as part of the review.

Labour MPs also want penalty clauses to prevent big pay-offs to directors who have to quit firms in financial difficulty and to end the practice of a cosy “magic circle” of directors sitting on each others remuneration committees setting their friends salaries.

But government insiders admit there is little detail and that actually framing legislation on the issue that works will be very difficult.

Links

Bonus for Gent as shareholders revolt

Tories slam fat cat pay crackdown