Let's recap on the details first:
- There will be disclosure of pay ratios - a policy that is directly addressed to the "fairness" question about pay, and one which many investors originally opposed but have come around to.
- There will not be mandatory worker representation on boards. Rather there will be a comply or explain requirement that companies have either a non-exec nominated at as a worker rep, or an employee advisory committee, or a worker director.
- Further clarification of Section 172 of the Companies Act.
- There won't be any further powers granted to shareholders, but the Investment Association will keep a record of any companies receiving 20%+ votes against.
- There will also be some tweaks to the UK corporate governance code relating to disclosure around remuneration.
Understandably, this package of reforms has been attacked for being a much watered down version of Theresa May's original ideas, which is what it is. So to the extent that the public is following this debate at all, I suspect all they will hear is that the Government has lost its nerve and/or given in to lobbying over the pay of corporate executives. As with previous reforms in this area, the fiery rhetoric which launched the initiative is not matched by the policy that emerges at the end.
On the most trivial level, I can't see what possible benefit the Conservatives derive from this. They risk reinforcing rather than challenging (presumably the original plan) the idea that they are weak in the face of corporate power. And for what? Does anyone with any knowledge of corporate governance believe that the final package of half-hearted measures will achieve much? It might have been simpler to kill the review off, blaming the need to focus on Brexit.
On the flipside, the government's weak position gives Labour the opportunity to hammer home the idea that the Conservatives always do this, that they are in thrall to corporate and financial donors and so on.
Looking further ahead, by leaving the door ajar the government has now opened up new terrain into which campaigners from the Left must now pour. The argument is simple: if even the Tories concede that worker representation on boards is desirable, and will implement a weak as water policy on it, we need to finish the job properly. This is a straightforward campaign opportunity now for all those who agree with the policy.
But also remember the dog that did not bark. There is no extension of shareholder powers in the government's response. Indeed the role of shareholders in terms of the proposals is very limited. This is quite striking when you consider the last 20 years or so of attempts at reform. I've argued before I think future governments would put far less emphasis on the role of shareholders when trying to tackle these issues, but I'm surprised it's a Conservative one that did this first. I think this is the shape of things to come.
Still, there's still some time for some nonsense in there. The government does advocate the ICSA (company secretaries) and Investment Association (asset managers) providing guidance on how companies can take account of the views of employees and other stakeholders. I must be missing something, because I can't see why one group of stakeholders (investors) should get to advise companies on how they should talk to another (employees). Labour should attack this idea for the nonsense it is.