UK to get binding vote on pay

David Cameron, the British prime minister, has confirmed that shareholders will be given a binding vote on pay in plans to be outlined in the next few weeks.

Cameron said shareholders and customers were being ‘ripped off’ by high pay for poor performance.

Measures to improve the transparency of pay packages and shareholder power over severance packages will also come in, he added.

But the Confederation of British Industry (CBI), an influential lobby group, has criticized the proposal for binding votes, saying it would be like ‘shutting the stable door after the horse has bolted’.

The comments were made as the government prepares to outline its plans for executive pay later this month, following a lengthy consultation period.

Interview details

In an interview with the BBC yesterday, Cameron initially said ‘everything is on the table’ but then went on to confirm a number of details.

‘The absolute key, and the thing I can confirm today that needs to happen and will happen, is clear transparency in terms of the publication of proper pay numbers, so you can really see what people are being paid,’ he said.

‘And then binding shareholder votes, so the owners of the companies are being asked to vote on the pay levels and ‒ absolutely key ‒ vote on any parts about dismissal packages and payments for failure.’

Consultation draws to close

The UK, which has had a non-binding vote on pay since 2002, first floated the idea of a binding vote in a consultation document published in September last year.

The document acknowledged that many shareholders and other stakeholders do not support such a proposal.

Yesterday the CBI was quick to criticize Cameron’s idea for a binding vote. John Cridland, director-general of the CBI, said he supports stronger links between pay and performance, but believes a binding vote would be ineffective as ‘shareholders would only be voting after the problem has happened’, according to the BBC.