Tuesday, 14 April 2015

Labour manifesto - the other corp gov stuff

OK, from Labour's workplace manifesto, here's the full text of the corporate governance proposals.

Short-termist pressure in the UK can undermine good workplace relations and weakens incentives to make the long-term investments in training, technology or R&D that underpin our most innovative workplaces. Labour will give investors a duty to act in the interests of ordinary savers and prioritise the long-term growth of companies they invest in. We will change takeover rules by restricting voting to investors who already hold shares when a bid is made and strengthening the public interest test to protect the UK’s national interests.
Pay at the top has seen huge increases in recent decades, often regardless of company performance or the situation of the wider workforce. Labour will improve the link between pay and performance by simplifying executive pay packages and ensuring greater transparency in organisational pay. We will require companies to publish the pay packages of the ten highest paid employees outside the boardroom and the ratio of the total pay of their top earner compared to the average employees.
We will also require investment and pension fund managers to disclose how they vote on pay and other issues and introduce binding votes on remuneration packages that work, by ensuring shareholders must approve a decision in advance, not after the event. And we will ensure that the voice of ordinary employees is taken into account when executive pay is set by putting employee representatives on remuneration committees. Elected employees would follow the same confidentiality requirements as other representatives. Unions, where they are recognised, and other employee representative structures should play a role in facilitating elections, as well as supporting the training of employee representatives. Where unions are not recognised, a process for electing worker representatives will be established.

There's a suggestion of doing something on fiduciary duty in there, much more in line with the original Kay Review recommendations. Could be a big deal, the Law Commission seemed to think it wasn't doable (if I read it right) but from memory the Aus system has something like this in there.
I think there's a slight change in the previous M&A policy - there is no mention of a higher threshold for votes to pass.
On executive pay, I am intrigued by the commitment to "simplify" executive pay. A lot of people across the board would agree with that aspiration, so could be fertile territory. Scaling back variable pay is obviously one way to do it. Not sure a binding vote on exec pay in advance is actually different in form to the new rem policy vote, though this could be made annual.

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