The Enterprise And Regulatory Reform Bill

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As of October 2013 the ‘Enterprise and Regulatory Reform Bill’ was amended by parliament under the proposal of Vince Cable , the new powers gave shareholders a binding vote on executive compensation , this meant that any changes in executive pay required a 50% shareholders approval. Before this shareholders votes on such matters were advisory , this meant even if there was a vote against executive pay they could still be increased regardless. This is significant as it shows a change in peoples perception on the role of shareholders within a company and leads to the point if this is correct. One of the main reason for such a change in the bill was many of the public felt that executive’s were over paid, ‘The average FTSE 100 chief…show more content…
In the view of many these increases of there pay were not justified , and was a contrast to shareholders investment money going down in value due to decrease in share prices of the company. What this showed was in some instances the objective of the executive’s were given priority of the shareholder which ultimately led to the shareholders losing out , and so introducing such power allowed shareholders to allocate pay rewards more closely aligned with corporate objectives and performance. These reasons overall echo the idea that it allows shareholders to have a greater say on how the company should be run by controlling the pay of executives as before this shareholders would be very limited in the say of pay with the only option being to replace committee members and directors. This in itself would not be a likely option as it could become costly in the long run and create uncertainty which may have more negative impacts. One of the reasons to give such measures was to reduce such excessive pay packages to executive so the question to ask is whether these reforms introduced since 2013 has actually worked. According to PWC at the end of 2013 percentage base pay increase of main board members increased by 3.5% compared with the national average earning of 1%
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