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Banking Bill

My Lords, the amendment raises the question raised in Committee when my noble friend Lady Turner of Camden and I tabled an amendment concerning the operation of remuneration committees, which in all companies and most banks recommend the rewards and remuneration for directors. In my unavoidable absence the first time that the new clause that the amendment would insert was relevant, my noble friend Lady Turner spoke on 14 January concerning what had happened with regard to that remuneration over the years and the resentment that it had caused over a wide scan of British society. Indeed, this afternoon your Lordships have heard of remarkable events: the unusual taking to the streets by British workers in an almost Gallic fashion. This has in part been fuelled by that powder keg of resentment and the inequalities which helped to ramp up British society. The amendment is different from the one in Committee, as indeed it must be. It raises the question of remuneration committees in the weak form that the amendment in Committee sought to insert—namely that the Treasury should have power to appoint a person to a remuneration committee—and it goes on from there. I have two questions for my noble friend. First, has he rethought his objections to the weaker amendment brought forward in Committee? Secondly, does he have any similar objections to the stronger one which takes account of what was said by some speakers at that stage? All speakers in the debate in Committee, including the Minister to some extent, expressed strong sympathy with the concerns that lay behind the amendment. This is hardly surprising. When I first wrote and spoke on these questions in your Lordships’ House in 2003, for example, it was difficult to get people to believe that directors had had their remuneration raised in the previous 10 years by 288 per cent instead of the 45 per cent which overcame most salaries and remunerations in society. The top bankers, whose irresponsible practices have been part of the reason for the crisis into which we have fallen, must not be allowed to profit from any of the provisions in the Bill. It should be made explicitly clear, not merely implicitly clear, as the Minister and others have sometimes argued, that measures can be taken to prevent that happening. Indeed, President Obama, in his recent broadcast to the American people, said that the measures in America need, "““transparency, rigorous oversight and clear accountability so taxpayers know how their money is being spent””." With the billions of pounds of taxpayers’ money being offered to the banks in our jurisdiction, that formula would be adequate only if one adds what my right honourable friend the Prime Minister always adds in his descriptions of what is being done: that there must also be fairness, in a social sense across the board, in the results of what is being done. All speakers in Committee suggested that the weak form of the amendment that was then moved had a particular defect. The noble Lord, Lord Higgins, for example, said, at col. 1652, that it was very modest and that it was still open to colleagues on the remuneration committee to ignore the appointee’s voice, which is meant to be the voice of public opinion and reasonableness, because they could not follow his objection to the remuneration that was being proposed. As my noble friend Lord Borrie pointed out, the non-executive directors, who are supposed to keep a special eye, as he put it, on the remuneration of executive directors, are somewhat disinclined to vote down the proposed remuneration in companies in which they are merely non-executives. In Committee, I quoted from one of the many books that make a general point about the defect of the remuneration committee regime that we exercise in our law. We must not pass a Bill that says nothing about this question. There is widespread public resentment and concern, to which I have already referred, that when a bank falls within Part 1 or Part 3 of the Bill—I am entirely responsible for the defect in my amendment on the Marshalled List, in which Part 1 is printed without the ““1””; it is a typographical error, for which I am responsible and for which I apologise to your Lordships—the top bankers whose irresponsible practice has helped to create the crisis should in no way profit from the measures that we are taking, and the measures that we are taking should make that absolutely clear. My noble friend and I therefore tabled Amendment 20 to cure the defect which a number of your Lordships pointed out in Committee: namely, that the appointee of the Treasury might be put on a remuneration committee and be ignored. That is a justifiable objection if the rest of the proposals are accepted. We cannot rely either on institutional shareholders to take the point on remuneration committees or on directors who have shown that they cannot be trusted not to restart the same old spiral into huge excesses that are quite unjustified in any social sense, and at the same watch working men and women risk and lose their jobs and their futures in a society in which they have so much influence. My noble friend and I sought to cure this defect—as I said, the noble Lord, Lord Higgins, among others, pointed out that the voice of the Treasury appointee had no sanction behind it and could be ignored without consequence by other members of the remuneration committee as he did not have a decisive voice—in subsection (7)(a) and (b) of our proposed new clause, which seeks to provide for the necessity of approval by the Treasury appointee, or alternatively by the FSA, which will have been consulted by the Treasury before any such order will have been made, as your Lordships will see from the Marshalled List. If it is objected that this takes the matter out of the hands of the normal machinery of banks and companies, shareholders and the other normal instruments of the law, the answer is that it is time for something to be done. Billions of pounds of public money have been put into these institutions and especially into the lack of activity by institutional shareholders, who should pay special attention to the issue. Should this be so—and it is—and they have failed in the past to deal with the issue, and directors have felt free to abuse the institutional gap that this has created, then there is a need for new institutions. On 4 January, the president of the CBI said that these problems need a new institutional base. Today, with £37 billion of taxpayers’ money engaged, it is not surprising if that argument gains further force every day. Your Lordships overlook it at the peril of us all. If it is said that the time is not yet ripe to deal with this matter in regard to banks, when the Companies Act 2006 failed to adopt an institutional regime by regulation of companies as a whole, my reply is that those who resort to the feeble excuse of the principle of unripe time should remember Professor Cornford’s argument. Time is like the medlar: it has a habit of going rotten before it is ripe. This is not a Bill in which your Lordships should exercise that kind of option. It is time that regulation in the public interest extended its beneficial range beyond the frontiers that have so far protected directors’ remuneration from abuse. The old protectionist notion that company institutions are enough to protect society against the scandals of the past two decades has now been shown to be wrong. If people say that other executives are paid even more than directors, as has been said in previous debates, the remedy lies in the hands of the skilled draftsmen to whom I hope the Government will place our rather rudely drafted new clause. It may well be that other persons than directors should be controlled by the Financial Services Authority, as would be the last recourse in our amendment. It is my fervent hope that the Minister will take the opportunity to accept the spirit of our amendment and bring it back to the House with whatever drafting adjustments it requires. On the passage of this Bill, he will be placing his name on what will be a momentous stride forward in the law. I beg to move.