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New Year, new abuses of corporate power. Figures released at the year-end
show that 75 senior Directors of UK companies have just paid themselves average bonuses
of over £700,000 each, with 14 of them topping £1m each. “Fat Cat” headlines again
dominate: check out
in
The Guardian .
Neither the Daily Telegraph nor the Financial Times carried any report at
all, perhaps understandably. For the overwhelming majority of the population, exploitation
on this scale is simply not acceptable. 
The Government could take effective action, if it wished. So far, its proposals
are ineffective: it proposes to empower shareholders to rap the knuckles of Directors,
once the bonuses have been paid or contractually committed. But that will do no good:
the shareholders will simply rush around, closing stable doors after all the bolting horses.
This gross abuse of power arises precisely because these payments can be
fully approved in secret - in the secrecy of a company Board meeting – and they
can take immediate effect, as a matter of law. A Director can begin a 2.00 pm
meeting strapped for cash, and emerge at 2.30 pm as a millionaire. It is better than the
Lottery, because you and your colleagues are fixing the rules, and making the Draw.
And it beats relying on Chris Tarrant.
I know. After all, I am both a qualified lawyer and Director of a public company
quoted on the London Stock Exchange. I am an insider. I know my company law. These
processes are all perfectly legal, perfectly legitimate, sanctioned by statute law and
precedent. None of this exploitation is subject to prior publicity, or the prior
approval of shareholders. The Government allows these Directors to behave as they do,
to exploit their companies and their shareholders, and does nothing to intervene.
We all share responsibility for permitting these arrangements to continue. In my view,
the Companies Acts should be amended, by this Government. It should be a statutory
requirement (certainly for all companies authorised by the Stock Exchange to raise
funds from the public) , to secure the prior approval of their shareholders for all
senior remuneration packages, say above £100,000 per year.
The law should require proper public-access meetings to be held, with the media invited. No senior remuneration should be allowed to take contractual effect until approved by the shareholders. And while many packages would still be approved, the process would act as a break upon the worst abuses of power.
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Why does the Government not act? Because the move would be intensely unpopular with
the business community. And the Government has not yet developed a proper,
arms-length relationship with the corporate sector. Ministers are gripped by a
strange subservience, which precludes radical reform. And I recognise that the
opposition of the business community would be very intense indeed.
Why? Because this power of secret exploitation lies at the very core of corporate
power, nationally and internationally. All the great businessmen are adept at
exploiting the opportunities which it creates. That is part of their cretivity.
All the great fraudsters have similarly revelled in the manipulative freedom it
bestows upon them. The business community realises that, if the principle of
“prior shareholder approval” were to be conceded in this case, it would in due
course be extended to other matters. And the power of the corporate sector would
be gradually, perhaps fatally, eroded. Boardroom secrecy is to the business
community what a full head of hair was to Samson.
“If we were to force UK companies out into the open”, the Government would no doubt
say, “there would be corporate flight from London to those countries continuing to
offer the facility of continuing secrecy. London would be weakened, as a financial centre”.
That would, I accept, be a possibility, if grossly exaggerated. It is the mantra
defence, deployed by all conservatives to inhibit all significant reform. There would
inevitably be “secrecy havens”, just as there are tax-havens and scrutiny-havens.
Public counter-measures would have to be prepared, and the ground laid by diplomatic
initiatives. Certain it is that the corporate sector could not operate as it does if
its affairs had to be subject to effective public scrutiny.
The electorate expects action. And this issue is not one which a Labour Government
can continue to ignore. Fat cat headlines dominated the 80s and the 90s, and many
thought that, with the return of a Labour Government, these abuses of power would be
confronted. Ministers will not be able to dodge the issue for ever. PS On a different theme entirely - if you fancy a gentle saunter with the great Sam Brittan, pondering the future of the consumer society and what Keynes had to say about it, read him in today's Financial Times - I do not share the Keynes/Brittan view of the future, as you will gather from my own pamphlet Multiple Differential Uncertainty But it's certainly a major issue. Back to Diary Archive
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