Company Law Reform Bill [HL]

moved Amendment No. 203:"Page 183, line 20, at end insert ““; such information to include—" (i) an analysis of the general pattern of remuneration in the enterprise and how that has been taken into account in determining directors’ remuneration; (ii) equivalent information on all subsidiary companies,”” The noble Lord said: My Lords, I think this amendment could be agreed to without too much discussion. The last pay statement summarising the position of Britain’s 350 largest companies showed that directors’ pay increased by 18 per cent last year, compared with 4 per cent for the average. Four per cent may be the average technically and politically, but common sense tells us that that average includes people on many millions. We should be talking about the median. It is not so straightforward a statistic to produce quarterly, but it is much less than the average. The growth of inequality between the median and the top 1 per cent has been going on for many years, and one would obviously question its justification. I draw your Lordships’ attention to an interesting article on the United States by Samuel Brittan in the FT on 10 February. It showed how the median worker there had not benefited at all from the increases in the so-called average, because the increases were all at the top; in other words, the inequality is exactly the same, if not even greater, on the other side of the Atlantic in the iconic Anglo-Saxon country. Brittan was reluctantly driven tacitly to reflect the view—he has confirmed it to me subsequently that this is a proper reading of his article—of a US commentator that this was down to,"““mutual pay determination by an exclusive cabal of chief executive officers””." That is not the language of a middle-of-the-road person such as me—I do not normally use the language of these firebrands—but it is what he said. He summed it up as,"““if you scratch my back, I’ll scratch yours””." I think that we know what that means. All sorts of codes have been drawn up in recent years—I shall read from one of them shortly. It is not just people who are somehow left of centre—I do not know whether I include the Liberal Democrats in that these days—who are raising this issue. The director of investment affairs of the Association of British Insurers recently said that there would be,"““detrimental consequences if the premium commanded by executives rises too far above general levels of pay in the economy . . . It can’t go on forever without something snapping””." Another interesting observation was made by the Co-operative Insurance Society, which gives advice to people asking questions of boards of directors. It stated, with tongue in cheek—noble Lords may not want to take it too much at face value—that remuneration committees are becoming increasingly innovative when it comes to maintaining executive pay growth,"““often regardless of performance””." I am sure that the Minister will refer to codes of practice. Members on the other side of the House will know of the standing and provenance of the Financial Reporting Council. It produces the combined code. The code is not government policy—it is even more interesting than that. As I understand it, it is the policy of accountants and the City. I do not know whether the noble Lord, Lord Sharman, can confirm it, but that is its provenance.