Tuesday, 27 September 2011

Rem comm reform

Well, I was there, I heard Ed say we should have employee representation on all company remuneration committees. This goes further, I think, than what he has previously said publicly. Coincidentally, it was also the one policy that two panellists in the fringe meeting I was chairing on corporate governance etc said they would want to hear in the leader's speech.

As I've said previously, I do think this would be a valuable reform, as I believe it could have an impact on actual decision-making. I won't reiterate previous posts, but if you buy the Sunstein argument about dissenting voices breaking up a reinforcing tendency in groups of similar views, this looks like a decent policy proposal. Decent, that is, if you believe that there is a problem with executive pay, which is not necessarily the case for some of the more Blairite end of the party.

The other thing this reform would likely do is open up a wider debate about shareholder primacy in corporate governance. Again, you may or may not think this is a good thing. But it would certainly pose deeper questions which, as is no doubt obvious, I think are worth giving serious thought to.

Two further questions. First, where as this idea come from? I'm fairly familiar with which organisations have championed this reform, and I don't think it's a question of, for example, the TUC simply convincing Ed's team. Maybe I'm wrong. But if not then this suggests that some people around Ed believe it's simply a good idea in it's own right. What we need to do now I think is move on from an argument based on the right of representation to one based on evidence of decision-making and outcomes. Apparently there is some out there.

Second, is there any chance of this becoming real live policy? Well I'm a bit more optimistic now. After all this idea is included in the BIS discussion paper on exec pay. The yellow half of the Coalition may therefore be keen to push this as a left-ish policy win. Therefore if Labour keeps pushing on it we may indeed see some movement.

I an imagine the dread felt by some Labour supporters about proposing 'workers on the board'. But a) I suspect that, like everything, the noise expended attacking it will be massively disproportional to the actual impact on companies and b) if they don't think it's a good idea and they do think there is a problem with exec pay, what are they proposing instead. I think we've given the disclosure+shareholder empowerment+Market oversight approach a decent try now. It doesn't seem to work very well.

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