:00:01. > :00:11.welcome here in the United Kingdom whatever their Government is doing
:00:11. > :00:49.
:00:49. > :00:59.The Secretary of State for business, I know that members are going out
:00:59. > :01:04.
:01:04. > :01:08.of the chamber quickly and quietly. Mr Speaker, I welcome the
:01:08. > :01:13.opportunity to set out the government's proposals for
:01:13. > :01:16.directors' pay. This follows an extensive consultation with
:01:16. > :01:20.business and the investment community. Since I first address
:01:20. > :01:25.the House on this issue, the government has initiated a broad
:01:25. > :01:29.national debate about shareholder activism. It has encouraged
:01:29. > :01:33.shareholders to become more engaged, as owners of their companies during
:01:33. > :01:38.the so-called shareholder spring. We have also seen companies
:01:38. > :01:43.engaging constructively in the face of opposition. This is an important
:01:43. > :01:49.step for encouraging improved pay and discipline. As I said then,
:01:49. > :01:52.there's evidence of a disconnect between pay and performance in
:01:52. > :01:57.large UK listed companies, and it is right that the government acts
:01:57. > :02:01.to address this market failure. Today I can therefore announced a
:02:01. > :02:06.far-reaching package of reforms that will strengthen the hands of
:02:06. > :02:10.shareholders to challenge excessive pay while not imposing unnecessary
:02:10. > :02:15.regulatory burdens. We will give shareholders new powers to hold
:02:15. > :02:19.companies to account on the structure and the level of pay, and
:02:19. > :02:23.make it easier to understand what directors are earning and how this
:02:23. > :02:29.links to the strategy and performance. So, shareholders will
:02:29. > :02:34.have a bounding vote on pay policy, including their approach to exit
:02:34. > :02:40.payments. Rather than being or a one-off vote, for the first time
:02:40. > :02:45.they will have a long-lasting control on pay. A company will only
:02:45. > :02:49.be able to make payments within the limits that have been improved by a
:02:49. > :02:56.majority of shareholders. This vote will happen annually unless
:02:56. > :03:00.companies choose to leave their policy unchanged, in which case it
:03:01. > :03:05.would happen a minimum of every three years. This will encourage
:03:05. > :03:12.companies to stick to a long-term pay strategy. It will put a brake
:03:12. > :03:15.on the annual upward pay movement. The policy should explain clearly
:03:15. > :03:19.how pay supports the strategic objectives of the company, and
:03:19. > :03:24.include better information how directors' pay relates to that of
:03:24. > :03:27.the wider workforce. Increased transparency on employee pay,
:03:28. > :03:33.including information which would show the difference between rises
:03:33. > :03:37.in directors' pay and that of their employees. Indeed, employee views
:03:37. > :03:41.on pay are important, and that is why I propose the company's report
:03:41. > :03:46.on whether they have taken steps to seek the views of their workforce.
:03:46. > :03:51.As part of their policy, companies will have to spell out their
:03:51. > :03:53.approach to exit payments. When a director leagues, the company must
:03:54. > :03:58.publish a statement explaining exactly what payments the director
:03:58. > :04:03.has received. Companies will not be able to pay more than the shell out
:04:03. > :04:07.-- shareholders agree. Alongside the binding vote on pay, there will,
:04:07. > :04:11.as now, be an annual advisory vote on how the policy has been
:04:11. > :04:14.implemented, including all remuneration paid in the previous
:04:14. > :04:19.year. And if a company fails the vote, this will automatically
:04:19. > :04:23.trigger a binding vote on policy the following year. Both the
:04:23. > :04:31.binding and the Advisory vote should be as strong as possible to
:04:31. > :04:37.keep up pressure on companies. I therefore welcome the CBI's call
:04:37. > :04:41.for the Government's code to be updated to codify best practice.
:04:41. > :04:49.Companies make a statement when a minority of shareholders vote
:04:49. > :04:53.against a pay resolution. Bass -- this will hold directors to account.
:04:53. > :04:58.Companies will have to report a single figure, the total paid
:04:58. > :05:03.directors receive for the year. They will publish details of
:05:03. > :05:07.whether they met performance measures. The government is going
:05:07. > :05:11.to bring forward amendments to the enterprise and regulatory Reform
:05:11. > :05:17.Bill shortly to introduce these measures.
:05:17. > :05:20.In tandem, and as a good policy- making requirement, we will publish
:05:20. > :05:26.for comment revised, simplify regulations setting out what
:05:26. > :05:30.companies must report on directors' pay. Lasting reform is dependent on
:05:30. > :05:34.both business and investors maintaining activism and developing
:05:34. > :05:41.and adopting good practice. The best companies are already leading
:05:41. > :05:43.the way and acting as early adopters of these reforms. We
:05:43. > :05:47.welcome the close engagement of institutional shareholders and
:05:47. > :05:52.their willingness to use their voting powers. We want this to be
:05:52. > :05:56.sustained and we shall continue to monitor disclosure levels. Evidence
:05:56. > :05:59.suggests that more institutional investors are disclosing their
:05:59. > :06:04.voting records and that up to three-quarters of these investors
:06:04. > :06:08.are now disclosing their votes. We consider further action if the
:06:08. > :06:13.number of investors volunteering to disclose their voting records does
:06:13. > :06:17.not continue to increase. In summary, this is a strong package
:06:17. > :06:20.of reform. It builds on the UK status as a global leader in
:06:20. > :06:24.corporate governance. It commands wide support from investors and
:06:24. > :06:29.business. It addresses public concerns about directors' pay.
:06:29. > :06:33.These proposals restore a stronger, clearer link between pay and
:06:33. > :06:38.performance. They reduce rewards for failure. They promote better
:06:38. > :06:42.engagement between companies and shareholders. Overall, they allow
:06:42. > :06:52.companies to be held to account. We look forward to discussing these
:06:52. > :06:54.
:06:54. > :07:02.proposals further with the Select Committee on 28th June. Thank you,
:07:02. > :07:07.Mr Deputy Speaker. I thank the Secretary of State for
:07:07. > :07:14.site of his statement today. In the last decade, the value of FTSE 300
:07:14. > :07:19.and could become BA's increased by 80% of the average total earnings
:07:19. > :07:23.increased by 108 %. This is by chip exhibitors. Many of these awards
:07:23. > :07:33.are not linked to success of performance. -- disease by chief
:07:33. > :07:38.One has to go back to 1979 to find things more in proportion, with
:07:38. > :07:42.executive pay growing by 0.8 % on average. It is imperative that we
:07:42. > :07:47.all do what we can to address this problem. In government, quite
:07:47. > :07:51.rightly, we did not rush to legislation. It was right to see if
:07:51. > :07:57.it could be avoided. When it became clear this was not the case, in
:07:57. > :08:01.2002 be made it mandatory for companies to publish a directors'
:08:01. > :08:05.remuneration report, and we give shareholders the right to vote on
:08:05. > :08:10.remuneration. As the Secretary of State said, the shareholders have
:08:10. > :08:16.been exercising those rights, to their credit, with some further
:08:16. > :08:24.this year. Reform must be led by them. The Secretary of State
:08:24. > :08:27.outline some proposals to assist them. I will can be measures to
:08:27. > :08:30.increase transparency, but I have a number of consent and questions in
:08:30. > :08:35.relation to other things he mentioned. First, with regard to
:08:35. > :08:38.the Annual binding vote on future remuneration policy, I have heard
:08:38. > :08:42.what the Secretary of State has said, but it is disappointing that
:08:42. > :08:46.having marched us all up to the hill, he appears to be marching us
:08:46. > :08:50.back down again by performing a U- turn on his original proposal.
:08:50. > :08:55.Having proposed an annual vote, he now seeks one every three years
:08:55. > :08:58.unless during that three years there is a change to the policy. Is
:08:59. > :09:04.it not the case that this will simply incentive five boards to
:09:04. > :09:09.draft policy as broadly as possible to avoid anything other than a
:09:09. > :09:12.three-year vote? Can he tell us how he would define a change to
:09:12. > :09:22.remuneration policy, and he will be the arbiter in each particular
:09:22. > :09:23.
:09:23. > :09:28.company as to whether a change has Bureaucracy has been raised as an
:09:28. > :09:32.objection to an annual vote, but I am not sure this cold water. With
:09:32. > :09:36.regard to the majority required for the policy to be approved, I think
:09:36. > :09:42.the Government should have been bolder and gone for a 75% threshold
:09:42. > :09:51.rather than a simple majority for approval. The chief investment
:09:51. > :09:54.officer of Fidelity worldwide investor said it would give
:09:54. > :09:58.companies a clear mandate and the need for a clear majority would
:09:58. > :10:03.also encourage shareholders to express their views. Why does he
:10:03. > :10:07.not listen to this? He says employees use on pay are important.
:10:07. > :10:11.If that is the case, why does the Secretary of State continued
:10:11. > :10:21.persistence standing in the way of introducing a requirement for
:10:21. > :10:23.
:10:23. > :10:28.employee representatives to sit on board remuneration committees. Can
:10:28. > :10:32.the Secretary of State clarify, when he says it will automatically
:10:32. > :10:36.trigger a vote on binding policy the the year -- the following year,
:10:36. > :10:43.if the vote fills, what does he propose in the following year? The
:10:43. > :10:50.backward Ford, or the Ford photon future policy? Finally, I also
:10:50. > :10:58.welcome the CBI's call for the it CIC code to be updated. But would
:10:58. > :11:08.he consider requiring DEFRA seed to carry out an annual report to keep
:11:08. > :11:14.
:11:14. > :11:19.good pay and remuneration to be on the agenda? -- the FRC. I would
:11:19. > :11:24.like to thank the honourable gentleman for the comments. I think
:11:24. > :11:29.it is worth recalling that in the 13 years of Labour government,
:11:29. > :11:35.there were seven secretaries of state who occupied my job, eight if
:11:35. > :11:39.we include Lord Mandelson twice. In the seven years that followed the
:11:39. > :11:44.introduction of an advisory board, none of my predecessors dotted
:11:44. > :11:54.necessary to introduce a binding vote on pay, despite the fact that
:11:54. > :12:02.
:12:02. > :12:06.there was a continuing trend for top pay to diverge... If it were a
:12:06. > :12:11.good idea to combine with the Lords, why did none of my predecessors do
:12:11. > :12:16.anything about it? Most of them were nominated by trade unions, one
:12:16. > :12:22.of them was a distinguished general secretary of a trade union. None of
:12:22. > :12:27.them taking the action to implement the measure he demanded. But I do
:12:27. > :12:33.welcome employee participation. And as I said, I will expect a report
:12:33. > :12:38.back from companies on whether or not they have consulted their
:12:38. > :12:42.employees on pay. Secondly, on the annual vote, there will be an
:12:42. > :12:49.annual vote of policy changes, he seems to find a problem with the
:12:49. > :12:54.fact that if nothing changes, it will have begun over a three-year
:12:54. > :12:59.period. The system encourages companies to think long-term. As I
:12:59. > :13:06.understand it, he has copied my example in setting up a report on
:13:06. > :13:12.long-termism. We want companies to think long-term. Should they choose
:13:12. > :13:21.to do the three-year process, it will put a stop to the ratcheting
:13:21. > :13:25.of annual pay awards. A three-year system would be a considerable an
:13:25. > :13:31.improvement. Should there be changes in policy, it will take
:13:31. > :13:34.place annually, which I have indicated from the outset. I also
:13:34. > :13:43.believe that in the case of the advisory votes, which will take
:13:43. > :13:49.place, and the Reporting Council will have a statement to the
:13:49. > :13:56.markets, I personally think it would be desirable to have a 75%
:13:56. > :13:58.vote to the threshold. But the Financial Reporting Council is an
:13:58. > :14:04.independent body, but having a higher threshold in that case would
:14:04. > :14:07.be desirable. He specifically asks what the Financial Reporting
:14:07. > :14:12.Council are doing in order to strengthen the overall corporate
:14:12. > :14:16.governance, they are pursuing investigating a variety of issues.
:14:16. > :14:26.How companies should formally respond with this it -- if a
:14:26. > :14:27.
:14:27. > :14:30.significant minority oppose a pay vote. There are also other big
:14:30. > :14:34.issues, and subject to their recommendations we will have
:14:34. > :14:38.considerable improvements in the system of corporate governance. In
:14:39. > :14:42.conclusion, these are very radical changes. I thought it would have
:14:42. > :14:45.enhanced the reputation of the honourable gentleman if he was
:14:45. > :14:53.Grace's -- gracious enough to acknowledge when a major set of
:14:53. > :14:58.reforms has been undertaken. Banks have taken excessive risks for
:14:58. > :15:01.which we have all played. Treasury Select Committee is now
:15:01. > :15:05.investigating mad, and has heard extensive evidence that senior bank
:15:05. > :15:10.executives have been rewarded excessively for taking those risks.
:15:10. > :15:20.In these proposals, what specifically addresses the problem
:15:20. > :15:22.
:15:22. > :15:26.of systemic risk in the financial institutions? As he knows, there is
:15:26. > :15:30.a separate set of regulations introduced by the Financial
:15:30. > :15:36.Services Authority that deals with the link between the types of pay
:15:36. > :15:40.packages that are introduced and systemic risk, excessive bonuses,
:15:40. > :15:49.which has had that effect in the past, and learning from the
:15:49. > :15:52.experience of the financial crash. Companies will be governed by these
:15:52. > :15:56.new regulations, and I would imagine that the shareholders of
:15:56. > :16:00.the leading banks will want to make sure that forward-looking pay
:16:00. > :16:10.policies take proper account of the systemic risk of their introduce
:16:10. > :16:19.
:16:19. > :16:22.and. -- of their institution. Can I welcome the minister's statement.
:16:22. > :16:29.Could I just problem and some of the comments he has made about
:16:29. > :16:33.institutional investors and their disclosure levels? Currently, only
:16:33. > :16:39.15% of asset management companies actually revealed their voting
:16:39. > :16:43.behaviour at company shareholders AGMs. Can he tell me, in the light
:16:43. > :16:53.and context of the statement, will he consider introducing legislation
:16:53. > :16:54.
:16:54. > :17:00.to ensure that becomes 100%? already indicated that we are
:17:00. > :17:03.looking at disclosure levels. There is a very worrying trend, and a big
:17:03. > :17:06.vote is through the insurance companies. There is a trend towards
:17:07. > :17:16.disclosure, and I have said we will have cut further measures if this
:17:17. > :17:17.
:17:17. > :17:22.does not go through that kind of trajectory. Can I very much welcome
:17:22. > :17:26.these proposals. The three-year Bind and pay policy will help to
:17:26. > :17:31.constrain the constant upward spiral that we have seen in
:17:31. > :17:37.directors'' pay in recent years. It has been suggested that the three-
:17:37. > :17:42.year pay policy agreement may turn out to be deflationary, as growth
:17:42. > :17:52.in the economy and hopefully the company -- the company improves.
:17:52. > :17:53.
:17:53. > :17:57.Would he welcome that? That is one of the points that they made when
:17:57. > :18:01.we discussed it with them. The three-year policy would be helpful
:18:01. > :18:06.in deflating top pay, and she is right to point out that the problem
:18:06. > :18:09.we are dealing with is an upward spiral in which pay is unrelated to
:18:09. > :18:18.performance and in which top executives are simply trying to get
:18:18. > :18:25.into the top quartile, which they cannot be. Is the singing a
:18:25. > :18:29.different song from the one he used to sing from the seats -- from the
:18:29. > :18:38.seat, when used to talk about business on both sides, the trade
:18:38. > :18:42.unions and bosses. The truth is not the truth, he has come here with a
:18:42. > :18:47.set of proposals that may have been OK some time ago, but has been tied
:18:47. > :18:55.by the Tories in the coalition, and he has even got rattled at Question
:18:55. > :19:05.Time having being asked a decent question by this pleasant shadow
:19:05. > :19:05.
:19:05. > :19:13.business secretary! I know the honourable gentleman is
:19:13. > :19:17.indeed very pleasant, but I do not think his questions were very good!
:19:17. > :19:21.As for my performance when I used to sit there, I did welcome
:19:21. > :19:30.Patricia Hewitt's changes seven years before the end of the Labour
:19:30. > :19:35.government. But it was taken as quite a week package, and what
:19:35. > :19:42.happens to be built on those proposals substantially. Peter Bone.
:19:42. > :19:51.The Secretary of State's proposals are unnecessary, and should the
:19:51. > :19:54.Secretary of State not concentrate on his day job? A company has
:19:55. > :20:04.waited indefinitely for an export licence in my constituency. Should
:20:05. > :20:05.
:20:05. > :20:12.we have more action? There is only a very small part of British
:20:12. > :20:15.exports but are covered by the licensing regime. The cover issues
:20:15. > :20:25.of national security, and we have to be careful with how we deal with
:20:25. > :20:35.
:20:35. > :20:41.that. Can I welcome much of what the business Secretary has said
:20:41. > :20:48.today? The proof will be in the pudding in practice. What
:20:48. > :20:50.difference will this make to the so-called erectors, the vermin of
:20:50. > :20:54.private-equity world critical for Boots the Chemist five years ago,
:20:54. > :20:57.and have sold it off to the Americans? How much money have the
:20:57. > :21:07.screwed out of this, and would he make an announcement about that
:21:07. > :21:16.
:21:16. > :21:19.today? This deals with public companies not Private Equity.
:21:19. > :21:25.welcome my right honourable friend taking a decent approach on
:21:25. > :21:28.directors'' pay, with business and investors. Does he believe that
:21:28. > :21:32.more power were to shareholders will allow people to participate in
:21:32. > :21:37.companies and meetings and get involved and buy company shares?
:21:37. > :21:43.This is surely what we all want, more people, more shareholders and
:21:43. > :21:47.more the involvement. That is correct. I congratulate the
:21:47. > :21:50.shareholders who have become actively engaged for the first time
:21:50. > :21:54.in many years in issues of pay and policy. One of the reasons they
:21:54. > :22:00.have been active as they know that -- the new this legislation was
:22:00. > :22:05.coming. The Secretary of State was right to castigate previous
:22:05. > :22:14.governments and their complacency. Top pay has not a practical issue
:22:14. > :22:18.it is also a moral issue. But isn't it time that we had a Top Pay
:22:18. > :22:24.Commission which would begin to look at how we begin the process of
:22:24. > :22:30.dismantling the obscenely high levels of pay for the top pay when
:22:30. > :22:34.the poor are getting poorer? I have seen the work of the existing topic
:22:34. > :22:43.Commission, which made very good suggestions, many of which we have
:22:44. > :22:50.taken on board. If the community were to come together, to look at
:22:50. > :22:54.topee, I would take great interest in what they suggest. A welcome the
:22:54. > :22:59.announcement today, especially after a decade of runaway executive
:22:59. > :23:02.pay. But would he agree with me that it is imperative that board
:23:02. > :23:07.members understand that what is done has to be in the interest of
:23:07. > :23:10.the employees, stakeholders and shareholders, but above all else,
:23:10. > :23:18.the long-term sustainability and well-being of the business
:23:18. > :23:24.operating through ethical means? Yes, she is absolutely right, and
:23:24. > :23:28.that is what the code is all about. It goes hand-in-hand with other
:23:28. > :23:34.initiatives we are taking to ensure that companies operate on a long-
:23:34. > :23:37.term basis. British business has been undermined for far too long by
:23:37. > :23:41.short-term decision-making, and we are trying to move it in the
:23:41. > :23:48.opposite direction. I broadly welcome the proposals by the
:23:48. > :23:52.government, but on a more practical issue, for example of some company
:23:52. > :24:02.was to default on not implement this legislation, what penalties
:24:02. > :24:03.
:24:03. > :24:09.There is a set of rules already. If companies fail to observe the vote,
:24:09. > :24:13.they will be making an unauthorised payment. There are considerable
:24:13. > :24:18.liabilities for companies that do that.
:24:18. > :24:22.I welcome this statement. The Secretary of State is right to
:24:22. > :24:26.tackle and the rewards for failure. The worst example is that of
:24:26. > :24:36.Enterprise Inns, who severed a nineties is 0.6 % decline in share
:24:36. > :24:38.
:24:38. > :24:43.values over five years. -- who suffered a 96.6 decline. And yet
:24:43. > :24:48.the chief executive rewarded himself �850,000 in bonuses. Our
:24:48. > :24:53.shareholders part of the answer but only part of it? There are
:24:53. > :24:59.thousands of businesses being damaged. When he pledged to uphold
:24:59. > :25:09.the will of Parliament and announced a review in this issue? -
:25:09. > :25:10.
:25:10. > :25:14.I know that my predecessor was responsible for publishing
:25:14. > :25:20.extensive debates with the honourable gentleman about the
:25:20. > :25:25.enterprise in and that model. In relation to the figures today, they
:25:25. > :25:32.are striking. I can't understand why if there's been such a
:25:32. > :25:38.divergence between pay, maybe the shareholders would have been more
:25:38. > :25:42.active. I thank the Secretary of State for
:25:42. > :25:51.this statement and agree when he says reports will be clearer and
:25:51. > :25:56.more transparent for investors. Is he not concerned about a potential
:25:56. > :26:00.unintended consequences that business investors will see this
:26:00. > :26:05.burden as a key factor requirement for any business they seek to
:26:05. > :26:12.invest in? Is the concern there may be too much involved, if that has
:26:12. > :26:15.become the case, for smaller businesses?
:26:15. > :26:20.That is a correct statement. It is part of the balance we are trying
:26:20. > :26:24.to strike. We went shareholders to be actively involved. In order to
:26:24. > :26:28.be actively involved, they need to know what is going on. They need
:26:28. > :26:35.information. That has some regulatory impact. I acknowledge
:26:35. > :26:40.that. We are trying to strike the balance. I think we have.
:26:40. > :26:45.I think the Minister is right to identify the deep public distaste,
:26:46. > :26:50.not just for rewards of failure but General rewards for those who are
:26:50. > :26:55.not in a meaningful way risk-takers or entrepreneurs. What I would like
:26:55. > :27:00.to know is this. How will he judge whether this policy has been a
:27:00. > :27:07.success over the next, say, three years? In 2015, on what basis will
:27:07. > :27:10.he say that today has worked? He is right to stress that we are
:27:10. > :27:19.not just talking about reward for failures. We are talking about the
:27:19. > :27:23.general escalation of pay which is unrelated to performance. I don't
:27:23. > :27:30.think it slightly that you can give a simple metric of how the policy
:27:30. > :27:37.will eventually work through. If what we see happening his annual
:27:37. > :27:41.reviews, or in some cases three- year-old used, successfully
:27:41. > :27:46.implemented with well-informed shareholders exercising their votes,
:27:46. > :27:49.in that way we will see a good deal of restraints and more strategic
:27:49. > :27:54.thinking in the setting of pay policies. That is what we are
:27:54. > :28:01.trying to achieve. Three years is a long time to pack
:28:01. > :28:10.in share options, big bonuses, huge share handouts, long-term incentive
:28:10. > :28:14.pays. Why not an annual shareholder vote which is binding in order to
:28:14. > :28:20.stop top executive remuneration ballooning wildly out of control
:28:20. > :28:24.within the three-year period? If that perverse behaviour does
:28:24. > :28:29.happen, then of course the existing annual backward-looking advisory
:28:29. > :28:33.vote will still happen. If shareholders are dissatisfied, the
:28:33. > :28:36.company, subject to the Financial Reporting Council, will be required
:28:36. > :28:41.to issue a statement. That will then require a vote the following
:28:41. > :28:47.year. There are checks and balances in the system in order to ensure
:28:47. > :28:52.that the kind of abuses you describe do not happen.
:28:52. > :28:58.Does my honourable friend agree that there is still a role for
:28:58. > :29:07.remuneration committees, in linking reward with positive performance in
:29:07. > :29:16.companies right across the country? Yes, there are indeed Rolls or
:29:16. > :29:19.committees. One of a issues I did not mission was the effort made to
:29:19. > :29:24.ensure that fees for remuneration consultants are probably declared,
:29:24. > :29:28.so that there is more transparency there, too.
:29:28. > :29:32.I welcome the statement, not least because I moved an amendment in the
:29:32. > :29:37.last Finance Bill. I appreciate the government was not consulted during
:29:37. > :29:41.this period. The shareholder vote is a binding vote. It is a
:29:41. > :29:46.straightforward yes or no. But the Secretary of State envisage a
:29:46. > :29:50.situation where the shareholders can amend the policy, to enable a
:29:50. > :29:55.ratio between the highest and lowest in comes?
:29:55. > :29:59.It will be possible to work out the ratio because of the information
:29:59. > :30:03.that will become available. We suggested it would not be sensible
:30:03. > :30:07.to make that compulsory as a metric because it can be very misleading.
:30:07. > :30:11.I described to the House before the anomalies that can happen when you
:30:11. > :30:21.have a company with a very large number of low-paid -- low-paid
:30:21. > :30:23.
:30:23. > :30:28.We don't attach overriding importance to that particular
:30:28. > :30:37.measure. But he is right that it is not just a question of Yes or No.
:30:37. > :30:43.Shareholders will have to engage with the company. It is a process
:30:43. > :30:46.not simply an event. I would like to thank the Secretary
:30:46. > :30:50.of State for the statement. I would be grateful if he could elaborate
:30:50. > :30:55.on the concept of long-term behaviour, which she has hinted
:30:55. > :31:00.that. I ran a business for 20 years before I came to this place. Why
:31:00. > :31:04.would have to say that the best decisions are always made with the
:31:04. > :31:09.long-term in mind. If we are to tackle mediocre performers, it is
:31:09. > :31:13.only by taking a long-term view that we will tackle it head-on.
:31:13. > :31:18.He is right. The Big Issue he mentions, which is essentially a
:31:18. > :31:28.cultural question in the way that a business has evolved over a long
:31:28. > :31:35.period. That was why I set up the review under Professor K and others.
:31:36. > :31:43.They are going to report in July. Some of their proposals will emerge
:31:43. > :31:51.in detail very shortly. Literally millions of people are
:31:51. > :31:56.trying to make ends meet. Why should we believe that the existing
:31:56. > :32:00.massive annual sums given to the heads of the banks, millions
:32:00. > :32:06.annually, as well as other organisations, is likely to change?
:32:06. > :32:10.We are in a very unfair society. There's no indication that is going
:32:10. > :32:14.to change as a result of what the Secretary of State has told us to
:32:14. > :32:18.read. This proposal is not designed to
:32:18. > :32:23.solve all the problems of income and wealth distribution. But it is
:32:23. > :32:28.designed to ensure that public listed companies to operate
:32:29. > :32:32.responsibly and a properly policed by their shareholders. He raises
:32:32. > :32:37.issues of tax policy, which I am sure we will debate on another
:32:37. > :32:42.occasion. I welcome the statement. But are we
:32:42. > :32:47.actually giving shareholders enough power, and is it fast enough in
:32:47. > :32:52.order to stop companies providing a lot of executive pay for poor
:32:52. > :32:56.performance? The measures in the Bill are strong
:32:56. > :33:00.measures. Whether they take place fast enough depends on how quickly
:33:00. > :33:09.this House proceeds with legislation. I expect to see it
:33:09. > :33:12.come into effect soon. In welcoming the statement, can I
:33:12. > :33:17.caution against weather presenters claiming credit for the spring. Can
:33:17. > :33:24.I also ask the Secretary of State in relation to D3 yeah binding pay
:33:24. > :33:32.policy reported by the petitioner investors, can he ensure that such
:33:32. > :33:41.policies do not have undue head room built into them? -- in
:33:41. > :33:46.relation to three year binding pay Well not proposing changes to the
:33:46. > :33:49.financial services bill. -- we are not. The question of whether
:33:49. > :33:59.there's a Leicester that -- Alastair city in the bill will
:33:59. > :34:03.
:34:03. > :34:08.depend on the shareholders. -- The prospect of legislation has
:34:08. > :34:15.helped. What I would say is that by passing these measures, we ensure
:34:15. > :34:19.that this spring is not a one-off event, that it is sustained.
:34:19. > :34:24.I would like to welcome the Secretary of State's measure
:34:24. > :34:31.proposals to give shareholders, who, after all, own the businesses in
:34:31. > :34:34.which they have shares, greater control over top pay. Further to
:34:34. > :34:38.the question, would he agree that the best way to increase activism
:34:38. > :34:43.is to increase the number of shareholders? What is the
:34:43. > :34:50.government doing to increase the number of private shareholders?
:34:50. > :34:57.He is quite right to stress the point that shareholders do own
:34:57. > :35:01.companies. It has often been overlooked. Clearly a widening of
:35:01. > :35:05.shareholding would be a desirable objective. We are looking at a
:35:05. > :35:11.variety of ways of doing that, not least encouraging employees to have
:35:11. > :35:16.shares in their own company. My colleague and I will be looking to
:35:16. > :35:25.see that that is brought into effect in the Royal Mail.
:35:26. > :35:29.There's evidence that a number of contributors to pay is the role of
:35:29. > :35:37.remuneration committees. Be there are concerned about the narrow base
:35:37. > :35:40.from which remuneration committees are drawn. -- people are concerned.
:35:40. > :35:45.There's been recommendations to widen membership. The Secretary of
:35:45. > :35:49.State has indicated his support for having an employee on remuneration
:35:49. > :35:52.committees. If he does not make it mandatory, will he make it
:35:52. > :35:57.mandatory that we have a wider membership from which to draw
:35:57. > :36:01.committees? I take his broader point, that
:36:01. > :36:05.diversity in directors is absolutely critical to changing the
:36:05. > :36:12.culture of companies. The bid to delay issue we are focusing on the
:36:12. > :36:17.moment is which in relation to women. -- of the particular issue.
:36:18. > :36:22.It is part of a wider picture. More directors, more diversity,
:36:22. > :36:26.including employees. A large proportion of the
:36:26. > :36:29.population have a stake in the stock market. Does the Secretary of
:36:29. > :36:32.State believe that there's a link between poor performance in the
:36:32. > :36:35.stock market over the past 10 years and the increasing share of
:36:35. > :36:41.corporate wealth that has been taken out by directors and senior
:36:41. > :36:45.managers? It is precisely the divergence
:36:45. > :36:54.between those two things which we are endeavouring to correct in this
:36:54. > :36:58.way. It may well be that... It is true in the banking system that
:36:58. > :37:03.very large levels of salary and bonus have been at the expense of
:37:03. > :37:07.dividends. This series of reform should help to correct that.
:37:07. > :37:14.The measures are welcome, but it should not just be a question of
:37:14. > :37:18.trying to stop the upward spiral of directors' pay. Something needs to
:37:18. > :37:22.be about it at the moment. Will the Secretary of State urge companies
:37:22. > :37:26.to look at existing levels of directors' pay, and if it does not
:37:26. > :37:32.result in dealing with some of the existing excesses, we look at
:37:32. > :37:36.coming back to drive down existing levels where it is excessive?
:37:36. > :37:40.We recognise that there's an important distinction between
:37:40. > :37:47.existing pay arrangements which the government has by contract and
:37:47. > :37:51.future pay policy, which will be subject of the binding vote. But
:37:51. > :38:01.there's a restraint on existing pay through the Advisory vote. As I
:38:01. > :38:05.
:38:05. > :38:11.have said out, I envisage the disciplines will be strengthened.
:38:11. > :38:18.As an employee and the union rep at ITV, I was dismayed to see the then
:38:18. > :38:21.boss of ITV receive millions of pay, perks and bonuses were making a
:38:21. > :38:26.series of catastrophic business decisions that boarded company to
:38:26. > :38:32.its knees and saw the share price plummet. I am dismayed to see he is
:38:32. > :38:34.sacking workers at Labour Party HQ. Would my honourable friend agree
:38:34. > :38:44.that the work force Bosman views should be considered in executive
:38:44. > :38:54.
:38:54. > :38:59.pay? Can I congratulate my right
:38:59. > :39:03.honourable friend on having secured this measure through the coalition
:39:03. > :39:07.government? Can he assure me that this is not going to drive UK-
:39:07. > :39:14.listed companies out of the United Kingdom, and what is it going to do
:39:14. > :39:18.to encourage more companies to get listed in the United Kingdom?
:39:18. > :39:25.accused of socialist tendencies by colleagues banning me, but I think
:39:25. > :39:35.the promotion of shareholders as a strange definition of socialism. --
:39:35. > :39:38.
:39:38. > :39:43.by colleagues behind me. In many quoted companies, highly paid
:39:43. > :39:46.employees earn more than directors. With the Secretary of State
:39:46. > :39:56.consider extending the transparency aspects of the legislation to
:39:56. > :40:01.
:40:01. > :40:04.employees as well as direct as? -- as well as directors. In some banks,
:40:04. > :40:10.and traders, they are paid more than their directors, and that will
:40:10. > :40:14.be covered. I think there are probably very few public listed
:40:14. > :40:23.companies outside the banking sector where what he describes his
:40:23. > :40:30.real. Would it be worth considering adding the fee structures and
:40:30. > :40:37.mechanics for fees, for executives search companies for those
:40:37. > :40:39.positions? I would happily give more information on the detailed
:40:39. > :40:49.work being done on the rules governing transparency in that
:40:49. > :40:55.sector. The one he mentions his new, we will have a look at that. The
:40:55. > :41:00.principle of more transparency is correct. Can he assure the House
:41:00. > :41:03.that the Government is a major investor in some of the country's -
:41:03. > :41:13.- as a major investor and some of the country's largest banks is
:41:13. > :41:18.
:41:18. > :41:25.going to be a major investor... will have seen that the pay and
:41:25. > :41:33.bonuses to senior executives reflected the Government's concerns
:41:33. > :41:35.about excessive pay in general. he confirm that high performing
:41:35. > :41:38.individuals and successful companies that perform within the
:41:38. > :41:43.proper corporate governments have nothing to fear from these
:41:43. > :41:48.proposals, but those companies that do not follow best practice clearly
:41:48. > :41:53.have something to fear? And as the government proposing some form of
:41:53. > :42:01.guidance as to what would be a best practice? There will be guidance
:42:01. > :42:05.issued on the disclosure and what requires to be disclosed, and I
:42:05. > :42:09.think the starting point of the question is correct, I want to make
:42:09. > :42:19.it clear that we have no objection to people being rewarded if their
:42:19. > :42:24.
:42:24. > :42:31.company performs well. Can I say that the Secretary of State is
:42:31. > :42:35.absolutely right to focus on the long-term perspective, opting for a
:42:35. > :42:40.three-year vote. Can he also emphasised the other issue in terms
:42:40. > :42:45.of company performance but often the issues company relative
:42:45. > :42:48.performance. When times are good, it is often good to reflect if
:42:48. > :42:57.companies are doing well because all companies are doing well, but
:42:57. > :43:05.this legislation is aiming for something different. Yes, that is a
:43:05. > :43:10.very helpful point. The analysis shows quite clearly that the
:43:10. > :43:20.overwriting -- overriding motivation changes with relative
:43:20. > :43:21.
:43:21. > :43:26.performance. Thank you. I welcome this because power to shareholders
:43:26. > :43:29.and business owners is how capitalism is a poster work. Yet it
:43:29. > :43:32.is essential that shareholders are able to exercise their votes in
:43:32. > :43:37.practice. Can the Secretary of State tell us what action he has
:43:37. > :43:39.taken to make sure brokers communicate to their nominees and
:43:39. > :43:44.shareholder owners that they have the right to vote at board meetings
:43:44. > :43:48.and are able to execute it? What else -- what action will he take to
:43:48. > :43:54.stop lending it is often used to steal away votes from the real
:43:54. > :43:58.owners so other people can exercise it? Taking specific action -- I'm
:43:58. > :44:01.not taking specific action on brokerages, but it is clear that
:44:01. > :44:09.the participation of shareholders reflect good practice and a
:44:09. > :44:13.favourable trend. We are talking about capitalism working well and
:44:13. > :44:20.working properly, and she could have a word with his colleague
:44:20. > :44:27.about the difference between capitalism and socialism. Point of
:44:27. > :44:37.order of. My constituent is languishing in a Greek prison in
:44:37. > :44:37.
:44:37. > :44:43.clearly unacceptable conditions, without no standard of due process
:44:43. > :44:46.being followed. I have correspondent with the foreign --
:44:46. > :44:50.corresponded with the Foreign Office, and was told I would
:44:50. > :44:54.receive a reply on Friday. I did not. I called on Monday and was
:44:54. > :45:01.told I would have a reply by yesterday, which I still do not.
:45:01. > :45:05.This is incredibly Argent, but I have had no reply to three letters
:45:05. > :45:11.or acknowledge from -- acknowledgement from the Secretary
:45:11. > :45:16.of State. I think he has got the message, I am sure everyone will
:45:16. > :45:21.have heard the point of order, and this will be taken very seriously
:45:21. > :45:25.after raising it on the floor of the house. This morning's Guardian
:45:25. > :45:30.newspaper carried a report of the announcement by the Deputy Prime
:45:30. > :45:38.Minister that the government is to introduce mandatory carbon emission
:45:38. > :45:45.reporting by large companies. DEFRA wrote a statement on the issue, but
:45:45. > :45:48.it was not available for members to read until after 10am this morning.
:45:48. > :45:53.I know you take a dim view of ministers who make announcements to
:45:53. > :45:58.the media rather than the house, so have you received any indication
:45:58. > :46:05.from either the Secretary of State or the deputy prime minister of
:46:05. > :46:09.their intention to make a statement to the house? Or can your -- can
:46:09. > :46:19.you recommend which newspapers to buy to keep track of the
:46:19. > :46:21.
:46:21. > :46:24.Government's think in. He is correct, we do take a dim view. We
:46:24. > :46:33.now come to preliminary business. The presentation of bills. The
:46:33. > :46:43.first being the Bank of England appointment of governor. Thank you.
:46:43. > :46:48.
:46:48. > :46:57.Bank of England appointment of Governor Bill. 6th July. No. Two.
:46:57. > :47:06.Scrap-metal it -- scrap-metal dealers bill. Friday the 13th July.
:47:06. > :47:16.Number three. Social care, local efficiency and identification of
:47:16. > :47:19.
:47:19. > :47:29.carers bill. Pray the 7th September. -- Friday 7th. Number four. Mental
:47:29. > :47:35.
:47:35. > :47:45.health discrimination number two. Friday 14th September. Mobile loams
:47:45. > :47:49.
:47:49. > :47:54.bill. Friday 19th October. -- mobile homes. Family justice
:47:54. > :48:04.transparency accountability and cost-of-living bill. Friday 26
:48:04. > :48:17.
:48:17. > :48:25.October. Neil Carmichael. Antarctic Bill. Friday 2nd November. Sir Paul
:48:25. > :48:35.Beresford. Prisons interference with wireless telegraphy bill.
:48:35. > :48:38.
:48:38. > :48:48.Friday 6th July. Prevention of social housing fraud bill. Friday
:48:48. > :48:49.
:48:50. > :48:58.13th July. Mr Mike Weir. Winched to fuel allowance payments claimants
:48:59. > :49:08.bill. -- winter fuel allowance. Friday 7th September. Mr Stuart
:49:09. > :49:11.
:49:11. > :49:21.Andrews. Prisons property bill. Friday 14th September. Cheryl
:49:21. > :49:32.
:49:32. > :49:42.Murray. Marine Navigation bill. Friday 19th October. Lynsey Roy.
:49:42. > :49:50.
:49:50. > :49:56.Off-road vehicles Registration Bill. Friday 26 October. John Glenn.
:49:56. > :50:06.Prevention of death build. Friday 2nd November. -- Prevention of Des
:50:06. > :50:17.
:50:17. > :50:23.Price marking Consumer Information Bill. Friday 2nd November.
:50:23. > :50:33.International official development assistance target Bill. Friday 13th
:50:33. > :50:39.
:50:39. > :50:49.July. Simon Kirby. Disabled Persons parking by just bill. Friday the
:50:49. > :50:51.
:50:51. > :50:56.6th July. -- Disabled Persons parking badges. Michael Meacher.
:50:56. > :51:06.General anti-tax avoidance principle bill. Friday 14th
:51:06. > :51:08.
:51:08. > :51:18.September. Transparency in UK companies supply chains,
:51:18. > :51:23.
:51:23. > :51:33.eradication of slavery bill. 19th October. Mr Douglas car as well.
:51:33. > :51:33.
:51:33. > :51:43.European Communities Act repeal bill. Friday 26 October.
:51:43. > :51:52.
:51:52. > :51:56.We now come to the main business. Liam Byrne. Thank you. Once upon a
:51:56. > :52:01.time the party office -- the party opposite like to tell us we are all
:52:01. > :52:07.in this together. Those words ring hollow today, after a Budget in
:52:07. > :52:13.which we have the granny tax capped and a tax cut for millionaires, we
:52:13. > :52:18.can assume the Chancellor was taking us for a ride. Yesterday I
:52:18. > :52:23.saw the man who introduced the Secretary of State to Easterhouse.
:52:23. > :52:28.He said he had so much confidence in the belief of did Secretary of
:52:28. > :52:32.State that he thought he should resign. Today's debate is about
:52:32. > :52:35.many of the people that he has stood up for. They are the one in
:52:35. > :52:38.four of her fellow citizens who are not all in it together with the
:52:38. > :52:43.Chancellor and the Prime Minister, they are not part of the Chipping
:52:43. > :52:51.Norton said, they do not get to go to kitchen suppers. They are
:52:51. > :52:57.Britain's disabled sufferers, parents of disabled children, and
:52:57. > :53:03.they now find a government determined to to renege on a deal
:53:03. > :53:07.they believed in. I hope this will be a consensual motion, and there
:53:07. > :53:11.will be interventions from the Treasury bench is asking about cuts
:53:11. > :53:20.and what cuts the side of the House of Lords. It is a perfectly
:53:20. > :53:25.reasonable line of argument. It's set out was wise. We warned of the
:53:25. > :53:29.risk of cutting too far and too fast. We warned of the risks of a
:53:29. > :53:34.double-dip recession and now we have one. The cost is astronomical.
:53:34. > :53:44.That is why the Chancellor had to explain to this house that he had
:53:44. > :53:46.
:53:46. > :53:50.to borrow �150 billion more than Labour would have borrowed. In the
:53:50. > :53:55.sector to stay's own department, the bill for jobseeker's allowance
:53:55. > :54:00.and housing benefit is now running out of control as a consequence of
:54:00. > :54:10.his failure to get people back to work. �9 billion extra is now
:54:10. > :54:14.projected to be spent than was originally forecast. Someone has to
:54:14. > :54:24.pay this bill. The Government, the Cabinet, this front bench has
:54:24. > :54:26.
:54:26. > :54:33.decided the people who should pay I'm glad you mentioned the disabled.
:54:33. > :54:38.Why did the Labour Party's support encourage apartheid for the
:54:38. > :54:48.disabled? Are they not full members of society, too?
:54:48. > :54:48.
:54:48. > :54:54.I welcome his intervention. The need for welfare reform is long
:54:54. > :54:56.overdue. Can the Minister explain when his party was in government,
:54:56. > :55:03.the shadow minister explain that when his party was in government,
:55:03. > :55:06.why did the government not get to grips with this? There was a
:55:06. > :55:09.transparency about where money was headed. The previous Labour
:55:09. > :55:13.government have plenty of opportunity to reform welfare but
:55:13. > :55:17.failed to do it. Can he explain why?
:55:17. > :55:22.The Labour government introduced some of the biggest reforms of the
:55:22. > :55:26.Labour -- welfare system that we have ever seen. York Freud,
:55:26. > :55:36.reviewing the changes, said the change was remarkable. -- York
:55:36. > :55:43.We have to return to the point but who pays for this government's
:55:43. > :55:47.failure. We have to take a decision about how the load is carried. This
:55:47. > :55:53.government has decided so much of the load must be carried by
:55:53. > :55:58.Britain's disabled people. New research shows that over the course
:55:58. > :56:03.of this Parliament, disabled people in our country will pay more than
:56:03. > :56:11.Britain's bankers. Indeed, in the final year of the parliament,
:56:11. > :56:13.disabled people will be paying 40% more than the banks. That, I'm
:56:13. > :56:19.afraid, tells you everything you need to know about this
:56:19. > :56:25.government's value is. This House should be grateful to Cerys UK and
:56:25. > :56:35.the AIDS charities who have done us a service by fitting out the impact
:56:35. > :56:39.of these movements. -- VII and charities. It is a scandal that
:56:39. > :56:44.people are being let down. The situation is not going to get
:56:44. > :56:49.better, it is going to get worse. Scope remind us that credit, if it
:56:49. > :56:55.is introduced, will hit disabled people 30% harder than non-disabled
:56:55. > :57:00.households. Reducing support for children will cut �1,300 from
:57:00. > :57:06.families with disabled children. The government's arbitrary cut De
:57:06. > :57:15.De La risks plunging half a million people, half a million families
:57:15. > :57:22.into a financial black hole. Perhaps we will hear how he would
:57:22. > :57:29.reform the Budget. Perhaps he can tell us how many factories were
:57:29. > :57:36.shut down and closed during the time that Labour were in power.
:57:36. > :57:41.I would like him to intervene again will come on to that in more detail.
:57:41. > :57:46.It is an important part of our motion. I assure the honourable
:57:46. > :57:50.gentleman I will let him have his say at that stage. We believe that
:57:50. > :57:54.the allowance needs reform. But we believe that you need an
:57:54. > :57:57.independent assessment. The point is, you should design the
:57:57. > :58:01.assessment first and in cabinet the savings. What this government has
:58:01. > :58:05.done is set an arbitrary, top down financial cuts and then it tried to
:58:05. > :58:10.scramble around to find out what kind of assessment will deliver the
:58:10. > :58:17.cash. So little thought has gone into this reform that disabled
:58:17. > :58:23.people now face being tested for the allowance, and for other
:58:23. > :58:29.benefits. The testing costs alone for reform will cost the taxpayer
:58:29. > :58:34.in this country �710 million. Surely we should be thinking about
:58:34. > :58:37.this harder. Surely we would be thinking about what is the right
:58:37. > :58:40.assessment for the allowances. There are different things,
:58:40. > :58:44.different benefits. How can we bring them together in a way that
:58:44. > :58:48.is more convenient for disabled people, and help them to secure the
:58:48. > :58:51.support that they need to live an independent life. Actually, that is
:58:51. > :59:01.a reform that would save money. When I was at the Treasury, it was
:59:01. > :59:02.
:59:02. > :59:06.costed as saving �350 million by 2015. It to this bleak picture, I'm
:59:06. > :59:11.afraid there's more. Cuts to social care and housing benefit will make
:59:11. > :59:14.the situation worse. �1 billion has been cut from local council budgets
:59:14. > :59:20.for social care since this government took office. Ministers