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"What planet is Vince on?" – London businesses outraged by Cable’s proposed executive pay cap

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LondonlovesBusiness.com at the Lib Dem conference

Business secretary Vince Cable admitted in his speech yesterday that economic challenges facing UK are the “equivalent of war”. His solution? Knocking down “fat cat bonuses” of top executives.

Is this really the answer to the UK’s economic woes? We asked London’s business scene for their views – and they seem to overwhelming agree that capping executive pay is a bad plan.

Charlie Mullins, owner and founder, Pimlico Plumbers: “You’ve got to wonder what planet Vince is really from”

“You’ve got to wonder what planet Vince is really from. The whole thing is just plain ridiculous.

“Last week I was at Number 10 where David Cameron and George Osborne were urging business owners to expand their businesses and employ more staff as a way of getting on top of the economy. And now we have Vince Cable calling for controls on how much top business talent can earn.

“Perhaps he’d like to put the Lib Dems in charge of all businesses in the country, since they are clearly better at this stuff than those of us who have built them from scratch and continue to run them profitably.

“With these kind of cutting edge ideas I don’t know why the business secretary doesn’t go all out and nationalise all businesses in the UK!

“Talk about working against the national interest. Is there some way we can have a secretary of state for business chucked out of office for being anti-business?”

Hugh Chappell, chairman and shareholder, Lovestruck.com : “What incentive will entrepreneurs have to invest in London?”

“Making salaries of top executives a topic of debate among employees would be absolutely counter-productive. However, the need of the hour is for the government to kickstart the economy with removing the business blockers that affect growth of business in the capital.”

“History tells me that the government is not brilliant at getting investment into the private sector. If the government keeps chasing the entrepreneurs with top executive pay freeze, mansion tax and this, that and the other, what incentive will they have to invest in London’s economy?” He added.   

Stuart Fraser, policy chairman at the City of London Corporation: “London firms must be free to pay a rate that attracts global talent”

Speaking from the Lib Dem conference, Fraser emphasized that executive pay should be based on performance. But he warned that “the City operates in a highly competitive marketplace and firms based here must be free to pay a rate that attracts the best global talent.

“It is important to remember bonuses were not a major cause of the financial crisis and, when used properly, are a perfectly legitimate form of pay. Bonuses allow firms to reward good performance without having to commit to large salaries that impose a higher cost base for UK companies, resulting in a competitive disadvantage for our economy. We have seen the impact of this in the recent job cuts across the banking sector.”

John Cridland, CBI director-general: “Talent competes globally… executive pay must not become political football”

Cridland made the following statement earlier today: “It is crucial that executive pay is squarely linked to performance, and there are cases where this link needs to be clearer.

“People should be rewarded for good work, and payment for failure is unacceptable, but it must be recognised that the jobs market for senior company executives is one where talent competes globally.

“We need shareholders to be more involved with the companies they invest in, and they should hold the board to account when it’s necessary. However, it is not the role of shareholders to micro-manage companies day-to-day.

“We welcome this consultation, but executive pay must not become a political football, and overly simplistic measures like ratios will not address the problem.”

Kevin Poulter, associate, Bircham Dyson Bell LLP: “Companies should be free to reward talent they see fit”

“I think it is unfair to inflict such a policy on private business, the entire premise of which is to make profits and encourage growth, celebrate and reward talent and accordingly success. 

“I am sure all of us have envied leaders in business and even suggested something along the lines that ‘I could do that job for that salary’ but in reality, there is – usually – a great deal of knowledge, talent, skill and experience involved.

“Companies should have the freedom to reward that talent and success as they see fit.  If a glass ceiling is imposed on salary or even on bonuses, especially if by force, it risks a reduced incentive across the workforce and therefore reduced opportunity for business growth. After all, not many of us would come to work if we weren’t being paid and we perhaps wouldn’t try as hard if there was no incentive to,” he added.

According to a research carried out by the Harvey Nash Board Practice, and the London Business School MBA Consulting Team last year, it was found that Consumer and Retail organisations have a high correlation between CEO pay and share performance

Michael Ferndale, director, board services & executive search, Harvey Nash plc: “Pay peanuts, get monkeys”

“It’s imperative to have a transparent system wherein the shareholders have a clear idea of the salaries of top CEOs. And ofcourse, if you don’t pay a handsome salary to your top executives, how will you run your company? Like M&S chairman, Stuart Rose once said, ‘Pay peanuts, get monkeys’.”

Miles Templeman, director general of the Institute of Directors: “Do not politicise the subject”

“We welcome that the business secretary sees the importance to economic growth of improving the planning regime. We also agree that it is right that the pay of business leaders is aligned to business performance.

“Indeed, there may well be some practical improvements that can be made to the way pay levels are set in big companies by improving the performance of remuneration committees. However, it is important that ministers do not politicise a subject that is best approached in a cool, dispassionate way.

“The business secretary should be using all his keynote speeches to promote the competitiveness of British business, rather than dwelling for political reasons on executive pay.”




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