Vince Cable pledged to crack down on the “outrageous” renumeration packages offered to some senior business managers just as it emerged that Network Rail is to hand its former chief executive a £1 million payoff.
Speaking at the Association of British Insurer’s biennial conference yesterday, the Business Secretary said that, over the next few weeks, he intended to summon all those involved in setting pay, including the heads of renumeration committees, at the UK’s largest companies to discuss ways of curbing “excessive and unjustified” pay and bonuses.
The aim was to “intervene sensibly” in order to end a “culture of rewards for failure”, which was unforgivable at a time when real wages were being squeezed across the country, he added.
Cable likewise confirmed plans to launch a consultation on changes to company reporting next month that will propose tougher provisions on the disclosure of executive pay and its link to company performance.
The problem was that executives’ salaries had soared even though their firms had underperformed and corporate pay policies often encouraged short-term behaviour that hurt company share values, he said.
“Ridiculous levels of renumeration are going unchallenged as the norm. There is no clear evidence of correlation with performance. It’s outrageous that last year median earnings for FTSE 100 chief executives rose 32%, whereas the share index rose only 7% and the average employee pay rose by less than 2%,” Cable said.
Speaking at the same event, former City Minister Lord Myners suggested that investors should be included on company renumeration panels in order to scrutinise executive pay. He warned that responsibility for compensation “needs to be firmly placed in the hands of shareholders”.
The statement came was Transport secretary Philip Hammond condemned Network Rail for handing former chief executive Iain Coucher a £1 million payoff as part of a package that included a year’s pay in lieu of notice and a settlement related to the company’s long-term incentive plan.
Coucher stepped down as chief executive last year after three years in the role and his renumeration was listed in the firm’s annual report, which is published today.
Hammond told the Guardian: “This payoff will stick in the gullet of every farepayer and taxpayer who think they pay too much to use our railway. The payoff is based on his contractual rights, but most people will feel it doesn’t sit well given the difficult times most families are facing.”
The coalition government had made it clear that any future incentive schemes should focus on “rewarding exceptional and sustained long-term performance and be based on the principle that bonuses are not an automatic right”, he added.
The announcement comes a month after Coucher was cleared by an independent investigation of misusing public funds. Antony White QC, who is an expert in asset tracing and employment law, was appointed to look into allegations that public money had been illicitly spent on perks.
White severely criticised the “astonishing” behaviour of Peter Bennett, Network Rail’s head of HR, who described an employee complaining of sex discrimination as a “silly cow”.
