Cable plans binding votes on executive pay Vince Cable has promised the most comprehensive reforms of boardroom pay for a decade by giving shareholders binding votes on pay policy and forcing companies to make executive pay more transparent. The business secretary will say that he expects shareholders to use these powers to end "failures in corporate governance" by some of Britain's biggest companies. Pay packages for FTSE 100 chief executives have quadrupled since 1998 - from an average of £1m to £4.2m - according to recent data. Mr Cable told the House of Commons that it was "neither sustainable nor justifiable" for directors" pay to rise at 10 per cent a year when the global economy remained fragile, listed companies" performance lagged behind and many workers were suffering pay cuts. The business secretary said he had been "greatly encouraged" by the so-called shareholder spring, which has seen rebellions by shareholders over pay at companies including Aviva, WPP and Barclays. Some pay policies had become "completely out of control" as well as "irrational and damaging," he said. The binding votes - on pay and exit payments - will only be every three years rather than annually, as the Financial Times revealed two weeks ago. But if a company changes its pay policy during that period it will have to put it before shareholders for re-approval. Mr Cable said that would avoid excessive administrative hassle for shareholders. "There was no point going down the box-ticking exercise even if a company keeps its pay policy unchanged," he said. But Labour is likely to argue that the coalition should have gone further and introduce annual binding votes - as well as other measures such as employees on boards. There will still be an annual advisory vote on how pay policy was implemented in the previous year. If a company fails that advisory vote, it will have to put its overall pay policy back to shareholders in a binding vote the next year. Meanwhile, the Financial Reporting Council will consult on requiring companies to make a statement if a significant minority of shareholders votes against a pay resolution - an idea put forward by the CBI this week. Companies will have to report a single figure for the total pay that directors received for the year - including bonuses and long-term incentives. They will also have to publish data showing the difference between executive pay and staff pay, as well as a comparison between company performance and chief executive pay. Mr Cable is likely to face criticism in some quarters for rejecting proposals that would have meant companies needing to pass a 75 per cent threshold of shareholder support for pay packages. Instead, it will remain at 50 per cent. The business secretary said that six companies this year had seen votes of more than 50 per cent against remuneration policy, including Sir Martin Sorrell at WPP. "A significant number of companies have reached that level of dissent," Mr Cable told reporters on Wednesday morning. Nor do the current plans include a ban on executives sitting on the remuneration committees of other companies; but that is being examined separately by the Financial Reporting Council. Mr Cable said that forcing companies to put employees on their boards would be "nice in an ideal world." "But there is a difference between supporting good process and actually compelling it," he said. Quite a few FTSE 100 companies are global companies, would you have to ensure you have got workers from Kazakhstan or Lagos on the board? He also defended the coalition's decision not to impose a maximum ratio between the lowest and highest paid staff in a company. A business that outsourced its low-paid staff would score well on that ratio, he pointed out, as would Goldman Sachs: "Because they are all millionaires." During a Commons debate on Wednesday Peter Bone, a rightwing backbench Tory MP, accused Mr Cable of putting additional burdens on business and said he should instead "concentrate on his day job." Tony Lloyd, a Labour MP, by contrast said the reforms were too "timid." Chuka Umunna, Labour's shadow business secretary, welcomed the broad thrust of the reforms but said it was "embarrassing" that Mr Cable had not introduced annual binding votes. "This U-turn on what we were led to believe was a flagship policy further undermines the credibility of Vince Cable and the emasculated business department, and adds to the pervading sense of a prime minister and chancellor out of touch with investor and mainstream opinion," he said. David Paterson, head of corporate governance at the National Association of Pension Funds, said pay had been "ratcheted up in a cloud of complexity." The proposals - to be introduced into the enterprise bill later this month - provided an opportunity for companies to rethink pay policies and "aim for restraint, simplicity and transparency," he said.