Governments plan to curb executive pay are announced

30th January 2012

A plan by the government to overhaul the executive pay system, which had first been explained in September 2011 by business secretary Vince Cable, was just announced. Cable gave more detail in a speech he gave to MP's.

"It's not Government's role to micro-manage company pay, but there are things we can do to address what is clearly a market failure," Cable said in a speech to Parliament.

The measures, which could impact jobs and business recruitment has been designed to improve what was deemed to be a flawed system. It is aimed in limiting executive pay to five times an average worker's pay in 2011. Cable noted that CEO pay has increased by 13% per year. Those in typical careers have not seen such big increases.

Cable also said company pay reports should be more detailed and clear. They should show how pay decisions were made and will be made in the future. Businesses also should explain their discussions with employees before making pay decisions.

Businesses said shareholder support will be reviewed before executive pay rates are accepted. According to Cable, 75% agreement by employees could be required.

The Government, investor, and business groups will now work together to implement the proposals in the best ways.

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