Report on House of Commons event – Restoring responsible ownership: ending the ownerless Corporation and controlling executive pay on Monday 5th September 2016
Submitted by Cliff Weight
Over 100 people attended this meeting including our chairman Mark Northway and me. Anthony Hilton of the Evening Standard also attended and wrote this excellent article. http://www.standard.co.uk/business/anthony-hilton-brave-move-to-alter-the-rules-of-britain-s-broken-board-game-a3337751.html
Chris Philp, MP for Croydon South, who wrote the report said he started work on the report several months ago and it was not a response to the recent Teresa May speech. It was a serious contribution, which happily has landed at an opportune moment.
He has three recommendations for change:
1. disclosure of pay ratios
2. binding vote on remuneration (to replace the current advisory vote)
3. shareholder committees, with specific mandated new powers.
He said that Theresa May has copied/purloined his first two recommendations and it looks likely that they will be implemented. The main focus of the meeting was on the third recommendation.
Chris said he is meeting with number 10 on Wednesday 7th September to discuss his report.
The report has been written with assistance from the High Pay Centre and copies can be downloaded from their website http://highpaycentre.org/files/Restoring_Responsible_Ownership_-_Chris_Philp_HPC_copy.pdf
Chris said the shareholder committee would do three things:
1. Replace the Nominations Committee and do its work instead.
2. Engage with the company on remuneration issues and
3. Question corporate strategy and performance.
Lord Myners wrote a foreword to the report and spoke in favour of it. He said that major corporations have shareholders who only hold small fractions of the company and so in effect we have an ownerless corporation. Non-executive directors had been invented to overcome this problem, that it has not really worked, with the main problem being that they only meet shareholders when it is already too late. He said this proposal will not be welcomed by chairman chief executives (who have enormous power and this proposal will curtail it) nor by institutional fund managers who like the system the way it is at the moment. The reason for pay growth is agency failure, he said, not the economics of supply and demand.
There was time for over an hour’s worth of questions, from the very knowledgeable audience. Interestingly almost all of the audience were supportive of the report.
I asked my question about the need for small shareholders to be represented on the shareholders committee and afterwards I confirmed with Chris Philp that he would add this into the proposals he took to number 10. Chris Philp responded that he agreed, as did Lord Myners who noted that in the M&S takeover proposal by Philip Green it was the small shareholders who were influential in resisting Philip Green.
This report on the meeting was prepared by Cliff Weight on 6 September 2016.