Directors' pay is not the Government's business The latest analysis of boardroom pay suggests that the average salaries of chief executives rose by one third in the past year without a commensurate increase in company value. But does this failure to match pay with performance have a corrosive influence that extends beyond company shareholders and into society as a whole? If it does, then there might be a role for the Government to rectify matters. If not, then it is hard to see why it is any of David Cameron's business to interfere in market decisions in the way that he outlined yesterday. Of course, there are political reasons for threatening to legislate: Mr Cameron evidently feels he must be seen to understand and sympathise with public resentment at excessive pay and bonuses for top earners when everyone else is feeling the squeeze. For a Government whose mantra has been that we "are all in it together," the City's refusal to acknowledge the need for austerity is a constant affront. The question that arises, however, is whether it is the Government's job to do something about this. Mr Cameron, rightly, accepts that it should be a matter for shareholders, not the state. However, he suggests that they should have greater powers to enforce their views. Shareholders can already vote to express their concerns with executive pay but their objections are not binding on remuneration committees. The Government proposes they should be and will bring forward legislation to ensure that they are. It is hard not to be sceptical about this approach. There will almost certainly be unintended consequences and drafting legislation to control boardroom pay is fraught with difficulties. Since it can't be retrospective, it could mean renegotiating thousands of contracts for employees whose pay will not be what they were promised. Furthermore, who will be covered? Often the highest paid individuals in a company are not the directors but traders and dealers. Are they to be included? There is a danger that Mr Cameron, in trying to assuage public concerns about disproportionate rewards in the City, will end up devising a stultifying regulatory framework that discourages enterprise and wealth creation. But one way the City could avoid legislation is if it demonstrated that it does understand public concerns by more obviously matching executive reward to performance.