Cameron goes to war with the City: PM to give shareholders power to end 'merry go round' of inflated pay-deals

• Shareholders will have right to block soaring executive pay under new Government plans


• PM's 'fairness agenda aims to convince people he has a vision for 'a fairer, better economy, where if you work hard and do the right thing you get rewarded'


• New plans cover the City, personal taxation, a commitment to water down European judges' power over human rights and an intention to keep the 50p income tax for people earning over £150,000

By Nadia Gilani

Last updated at 9:31 AM on 8th January 2012

David Cameron backed powers for shareholders to veto executive pay packages as political pressure to curb vast salaries and bonuses gathered pace.

The Prime Minister said he was determined to end the 'merry go round' of super-rich bosses rubber stamping each others' inflated deals and being rewarded for failure.

'The market for top people isn't working, it needs to be sorted out,' he told The Sunday Telegraph.

David Cameron, right, unveiled his 'fairness agenda' in response to the 'responsible capitalism' plan called for by Labour leader Ed Miliband left

He outlined detailed plans for reforms that he said would make hard-working people feel that their 'graft' was being rewarded.

Mr Cameron said he would use 2012 to convince people that he had a 'vision at the end of this, of a fairer, better economy, a fairer, better society, where if you work hard and do the right thing you get rewarded'.

His agenda covers the City, personal taxation, a commitment to water down the power of European judges over human rights — and includes his most significant intervention against any moves towards Scottish independence.

The plans were unveiled in response to Labour leader Ed Miliband, who has called for a 'fairer and better capitalism', and challenged the Government to back all the recommendations of the independent High Pay Commission in order to increase transparency and accountability in the boardroom and the City.

Super-rich: Under the new plans executives would be subject to the democratic will of shareholders over pay

DAVID CAMERON'S FOUR KEY POINTS ON NEW AGENDA

• A major reform of executive pay where shareholders would have to approve salary packages and, crucially, pay-offs, instead of simply having advisory votes as at present. This would be in a bid to rein in what he called 'crony capitalism', where underperforming executives were seen to 'fill their boots'.


• The 50p income tax rate for people earning more than £150,000 would not be abolished despite criticisms that it punished enterprise, because 'you've got to take the country with you', he said. He also indicated that the Lib Dem plan for a 'mansion tax' on high-value properties would not be in the next Budget.


• A personal commitment to water down the power of European human rights judges who had been at the centre of controversies with rulings that seemed at odds with public opinion. He will personally try to persuade the Council of Europe, which oversees the Strasbourg court, that its powers should be limited.


• An attempt to create a stronger and fairer Britain as part of the strategy to keep it united in the face of the threat from the Scottish National Party to break up the Union. Mr Cameron called for rapid moves towards a referendum in Scotland, which he said had to be 'sooner rather than later', but which the Nationalists do not plan until 2014 at the earliest.

Yesterday Ed Miliband emphasised his commitment to 'responsible capitalism' saying: 'If one of the battlegrounds of British politics is going to be who is really going to take action on executive pay, I say, 'Bring it on''.

Currently shareholders have a right to vote on pay awards, but the vote is 'advisory' and often takes place only after decisions have been made on executive pay.

Under the plans being drawn up by cabinet ministers, the vote would, for the first time, have legal force, so that executives would be subject to the democratic will of shareholders over pay.

'We've got to deal with the merry-go-round where there's too many cases of remuneration committee members sitting on each other's boards, patting each other's backs and handing out each other's pay rises.

'We need to get to grips with that.'

Meanwhile, new research showed that chief executives in 87 of the FTSE 100 companies took home £5.1 million in basic pay, bonuses, share incentives and pension contributions in 2010-11.

But there was no corresponding rise in the value of their companies, according to the Institute for Public Policy Research (IPPR), which carried out the analysis.

Total remuneration of chief executives increased by 33%, while the average increase in company value was 24 per cent, the think tank said.

The IPPR said reforms to tackle 'excessive' boardroom pay should go beyond 'shareholder activism'.

Nick Pearce, director of IPPR, said: 'This new analysis confirms that boardroom pay is running far ahead of company performance in many of the UK's major businesses.

'Attempts to link pay to performance haven't worked well because it's hard for shareholders to monitor the performance of individual executives.

'Instead, pay deals for top earners have become increasingly complex as well as increasingly generous.

'Tackling excessive top pay should include steps to ensure that employees get a fairer share of rewards.

'To reflect the contribution that all employees make to company success, we should make sure that employee representatives sit on remuneration committees and that boards report to all staff annually on pay levels across the company.'

Source : dailymail

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