My Lords, Sir David Walker has recommended that remuneration paid to high earners, which Sir David defined as those receiving more than £1 million per annum, should be disclosed in aggregated bands. The Government are now working to implement that recommendation, but have already indicated they will go further than Walker, in narrower salary bands and a lower starting threshold. These regulations will be fully consulted on and debated in Parliament and will complement and improve on the current disclosure framework.
Does my noble friend agree that there is widespread public concern that the banks have, in the main, depicted little evidence that they are prepared to undertake the radical reforms required since the banking crisis? Does he further agree that the Walker report’s conclusions are woefully inadequate?
I think that Sir David Walker has done an excellent job in his work on risk management and the role of the boards and, in particular, on the issue that he describes as stewardship—which is that the shareholders, the major investing institutions, must take their responsibilities as owners much more seriously than they have.
I share my noble friend’s concern that there is precious little evidence that those at the top of our banks appreciate the concern about those extraordinary levels of income. I would estimate that at least 5,000 people working in the banking industry in the UK will, if nothing is done, receive remuneration in excess of £1 million this year. The real responsibility must lie with the shareholders. Accordingly, I have written to the NAPF, the CBI and the TUC, urging them to use their influence to persuade trustees to ask their fund managers: “What are you doing to stop these unreasonable and unjustifiable levels of remuneration?”.
My Lords, I note that the Minister has considerable sympathy with the Question asked by the noble Lord. Will he refer to his colleagues in the Treasury the fact that there is a widespread view that naming bankers and what they earn is an essential part of bringing transparency to the industry? Would that not play a small part in returning some level of trust to an industry whose name is still in the mud?
I am not convinced that naming is a significant step forward. It is far more important to understand the architecture of remuneration within banks and how that is linked to performance and risk management. In early August, I suggested that David Walker needed to push the envelope a little further in a number of areas and suggested that he consider the issue of identifying people by name. He considered it, but he did not think it would add a great deal, and I am minded to conclude that he was correct. As I said, it would involve naming more than 5,000 people—all of whom, of course, would qualify for mansion taxes.
My Lords, I thank the Minister for what he has just said. Surely one of the problems of relying on shareholders more is that the individual small shareholder—a shareholder who has perhaps 1,000 shares and goes to an AGM—has no chance of making his ideas move forward against the pension funds which own much the largest quantities of shares and which often, frankly, do not wish to rock the boat.
My Lords, the noble Lord, Lord Renton, speaks with considerable experience of the corporate world. From my own perspective, private shareholders are often the most effective of all shareholders because of their ability to stand up at shareholder meetings and occasionally to prick the pomposity of the directors by asking questions in the open. The institutions often do not do that. However, the power of the vote lies with the institutions and they must take action. They must take action now because although they vote on the remuneration committee report, they do so after the act of payment. The decisions about bonuses will be made over the next six to eight weeks and it is important that our major institutions engage now with the companies and say: “We will not support grotesque payments. If you persist in paying them, we will exercise our votes to remove from the board the people who authorise them”.
My Lords, most of the people to whom we are referring here work in the investment banks. I find it quite extraordinary that Mr George Osborne, in his speech on 26 October, suggested that the pressure needed to be borne down on retail banks. The vast majority of people working in retail banks—in branches, call centres and service centres—only dream of these rewards. The real problems lie in the investment banks. But perhaps Mr Osborne is again evidencing his commitment to transfer wealth from the poor to the rich.
My Lords, will the noble Lord consider taking up the Bill which was introduced in this House by the noble Lord, Lord Gavron, and received widespread support from all sides, which calls for the prominent display of the ratio between the highest paid executive or director and the average total remuneration of the bottom 10 per cent of employees?
I had much sympathy with my noble friend Lord Gavron’s Bill, and I believe that the Walker recommendations will throw much more light on these issues than has previously been available. However, one needs to put David Walker’s definition of £1 million a year as the starting point for disclosure in the context of national average earnings being just over £20,000. I think that that shows the extent to which the space that those in banking live in is completely different from the world that the rest of us occupy.