Oral question asked in the House of Lords, by Lord Wedderburn of Charlton (Labour). It was answered on Thursday, 30 October 2008.

Companies: Pay Increases

Question: My Lords, I thank my noble friend for his reply, which showed a mild advance on that given by the noble Lord, Lord Jones, to the same Question in January. Does he not agree that the obscene rises in rewards, bonuses and the like for corporate executives in recent years mean that the voice of fairness must now be heard inside the remuneration committees of companies and similar bodies? Does he not also agree that the Government must consider, urgently and immediately, some control over the membership of remuneration committees of all public companies in the longer run and, in the short run, of those companies in which public money has been invested for shares?

Answer: My Lords, of course the Government agree with a great deal of what my noble friend has said. In its letter, the Financial Services Authority has made it clear that for banks, pay—and particularly bonuses—must be related to performance. If it is not, the Financial Services Authority will take into account a bank’s position in relation to where it receives government support. On the more general issue of companies, from 6 April next year, a new provision will require quoted companies to report in their directors’ remuneration report on how they have taken pay and employment conditions into account when setting directors’ pay. Directors’ pay should be set only by non-executive directors, not by those who benefit from it themselves.

Secondary information