British Government Threatens Slap Firms with Strict Executive Pay Rules
British Government Threatens Slap Firms with Strict Executive Pay RulesReuters

Britain's business secretary is threatening to enforce stricter rules over executive pay if companies continue to award hefty pay packages despite dwindling financial performances.

Vince Cable will tell the remuneration committee chairmen at some of the UK's biggest groups that the government is mulling over introducing new salary structures to stop firms paying their directors seemingly disproportionate amounts.

"If companies and investors are unable or unwilling to act responsibly, the pressure for stronger measures will be hard to ignore," Cable will say, according to extracts from his speech.

"Under such circumstances, I would consider options including stricter regulatory oversight of pay reports and policies, a requirement on shareholders to disclose how they have voted on pay, or a requirement to consult employees on pay. This is the time for companies, and investors, to show they can act responsibly."

According to Cable's business department, the average pay for chief executive officers rose by 13% each year between 1998 and 2010.

Cable will highlight how, in tandem, the FTSE 100 index failed to rise by the same amount.

Whitehall has already tightened its grip over how companies pay their top staff by obliging them to give shareholders a vote on remuneration policy at least every three years, as well as publically revealing how each director is paid.

His speech comes at a time when the two part-taxpayer owned banks, Lloyds Banking Group and the Royal Bank of Scotland (RBS), awarded staff and their bosses billions of pounds in bonuses, despite lacklustre financial performances, scandals and difficulties arising from the transition to privatisation.

RBS granted staff £576m (€690m, $953m) in bonuses for 2013 despite the 81% state-owned lender losing £8.2bn over the year.

Lloyds boosted its annual banker bonus pool by 10% to £395m and awarded its leader Antonio Horta-Osorio a £1.7m bonus, despite his already having a basic £1m salary.

Barclays chief executive Antony Jenkins revealed that he felt "forced" to bump up staff bonuses because the number of senior bankers who resigned from the bank doubled in 2013 after it cut pay extra rewards the previous year.

Jenkins said he was under pressure to increase staff bonuses and incentive rewards to £2.38bn in 2013, from £2.17bn in 2012, after 10% of its senior director workforce jumped ship.