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Company Law Reform Bill [HL]

I thank all noble Lords who have participated in the debate, which has been interesting, although it has been wider than some of the detail that we had been looking at previously. I particularly thank my noble friend Lord Lea. Again, he demonstrated the passion that he brings to issues of equality, fairness and cohesion. I suspect that he already knows that I may have to disappoint him by resisting the amendments. As my noble friend Lord Whitty said, it is entirely legitimate to raise the wider issues in this context. In the debate that we had on Monday on globalisation and inequality, one of the points that he raised was about a process of making sure that Government initiatives and legislation are tested for their impact on equality, and that part of the process seems to me entirely fair. The Government’s approach to directors’ remuneration is based on a number of important principles. Directors should be accountable to shareholders. The remuneration of directors is emphatically not a matter for directors alone; it is a matter for companies and their shareholders under UK corporate governance structures. We do not believe that there should be a requirement for other parties, such as employees, to have a direct role in deciding or approving directors’ remuneration, although companies may, of course, see benefit in consulting employees or their representatives. The second principle is that directors of quoted companies should not decide their own pay. Executive directors of quoted companies should not be involved in setting their own pay. The combined code is very clear on that point. Principle B2 states:"““There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his or her own remuneration””." In addition, provision B2.1 of the combined code states:"““The board should establish a remuneration committee of at least three, or in the case of smaller companies, two, members, who should all be independent non-executive directors””." There is very high compliance with those provisions. Quoted companies are currently required to disclose in the directors’ remuneration report the name of each director who was a member of the remuneration committee and the name of any person who provided advice or services that materially assisted the committee.