Company Directors: Earnings (Hansard, 28 November 1989)

§ The Parliamentary Under-Secretary of State, Department of Employment (Lord Strathclyde)
My Lords, no reliable information on directors' earnings is readily available.

§ Lord Dormand of Easington
My Lords, is the Minister aware that that is a pathetic reply? Having regard to the stark contrast between some awards which have been made to directors—some as high as between 50 per cent. and 110 per cent., for which they receive a gentle admonition from the Government—and those to the lower paid workers who are presently struggling against a 7.5 per cent. inflation rate caused by the economic incompetence of this Government, have the Government any morality at all? What will the Government do about such a state of affairs?

§ Lord Strathclyde
My Lords, I object to the tone of the noble Lord's supplementary question. To say that my Answer was pathetic is totally untrue. It is not the Government's role to interfere in individual pay settlements between companies and their employees, whether they are directors or not.

§ Baroness Turner of Camden
My Lords, is it not absurd to expect workers to settle for 7.5 per cent. or 6.5 per cent., as has been the situation in the National Health Service, in the light of the large increases which are acknowledged to be paid to directors of substantial enterprises? Will the Government look at the issue more from a social justice point of view than appears to be the case at the moment?

§ Lord Strathclyde
My Lords, the Government have repeatedly said that they do not support unjustified pay increases at any level. Where they are justified, they should be paid; and so be it.

§ Lord Mackie of Benshie
My Lords, will the noble Lord explain how the top pay award committee operates if it does not have any information regarding salaries in industry as against those in the public service?

§ Lord Strathclyde
My Lords, no central tables on directors' earnings are kept. As to how the top pay award committee operates, that is a matter for it, but pay should generally reflect what is needed to recruit, retain and motivate the right staff for the job within what businesses can sensibly afford.

§ Lord Diamond
My Lords, returning to the matter of social justice, surely the Government will do something for that poor director who found his salary slashed last year to a little over £850,000!

§ Lord Strathclyde
My Lords, I am not sure what the noble Lord's definition of social justice is. However, perhaps I may make the point that within this House there are many directors and chairmen of boards whom I am sure will testify to their own restraint.

§ Lord Bottomley
My Lords, have the Government ever given consideration to what Bernard Shaw said; namely, that everybody should receive the same income?

§ Lord Strathclyde
My Lords, that is not current government policy.

§ Lord Jenkins of Putney
My Lords, the noble Lord used the word "justified" more than once. Who decides what is and what is not justified in this context?

§ Lord Strathclyde
My Lords, that is decided between companies and their shareholders.

§ Lord Dean of Beswick
My Lords, is the Minister aware that, as a result of water privatisation, it is expected that the salaries of the top people running the privatised companies will double immediately? Does he consider the doubling of those people's salaries to over £100,000 conducive to helping the Government in the fight against inflation?

§ Lord Strathclyde
My Lords, again, that must be decided between the water companies and their new shareholders. However, perhaps I may point out 312 generally that among the nationalised industries British Coal, for instance, had no increase, the Post Office had a 9 per cent. increase, and British Rail had a 7 per cent. increase. Those figures relate to the salaries of the chairmen of those boards and indicate a certain amount of restraint.

§ Baroness Turner of Camden
My Lords, when dealing with the question of justification, do the Government consider that there is a role for arbitration in these matters? Why cannot that be used in the current dispute?

§ Lord Strathclyde
My Lords, if we are talking about the ambulancemen, we are going slightly off the original Question. In any case, it is illogical to make comparisons between pay increases for different groups or individuals.

§ Lord Gisborough
My Lords, increases may well be justified in many cases. However, does my noble friend agree that some of the salaries which have been reported have, to say the least, been insensitive in times of inflation and therefore that the people concerned would probably have been wiser to take less?

§ Lord Strathclyde
My Lords, the issue of sensitivity may well be valid, but ultimately the Government cannot be an arbitrator in what individual companies decide is right for individual chairmen, and shareholders ultimately have the right to object.

§ Lord Cledwyn of Penrhos
My Lords, further to the noble Lord's supplementary question, does the Minister believe that salaries of over £1 million a year paid to some directors are justified? Is he able to tell the House whether he and his noble friends believe that such people should be paid more than the Prime Minister?

§ Lord Strathclyde
My Lords, as I have said, it is up to individual companies to decide. The Government do not have a role to play in forcing companies to pay certain salaries or even deciding what companies should pay their chairmen and directors. As to the noble Lord's point about the Prime Minister, I understand that my right honourable friend still takes less than her proper pay.

§ Lord Mayhew
My Lords, will the Minister explain more fully the reasons those statistics are not compiled, and, if they are, why he has not announced them? What is there to stop their publication apart from the risk of embarrassing the Government?

§ Lord Strathclyde
My Lords, there is simply no requirement to compile those kinds of statistics, but the noble Lord is entitled to ask the question. I am sure that there are individual reports and accounts in the Library of the House where he can find that information himself.

§ Lord Hatch of Lusby
My Lords, perhaps I may help the noble Lord in his difficulties. Is he not aware that the figures have indeed been published 313 from within industry and that the average figure last year for the rise in directors' salaries was 21 per cent.? Does that not embarrass the Government in their present efforts to limit the ambulancemen and other workers to figures below the inflation rate? The 21 per cent. figure has been established as a national average increase last year.

§ Lord Strathclyde
My Lords, the 21 per cent. figure conies from a single survey. It is not necessarily all that scientific and the results should therefore be treated with a certain amount of doubt. In any case, the question of directors' and chairmen's pay awards has nothing to do with the case of the ambulancemen. That is an interesting question, but one to which we should come another day.

§ Lord Harmar-Nicholls
My Lords, in view of the picture that can be painted from the questions that my noble friend has answered, should it not be made clear that, alongside the situation in America, Germany, France and our main competitor countries, our directors' salaries are very low indeed?

§ Lord Strathclyde
My Lords, my noble friend makes an extremely good point. If the figure for the United States is taken at about 100, it appears that on a comparable basis the UK is paid about 60.

§ Lord Stallard
My Lords, how did the Minister make that comparison without knowing what British directors earn?

§ Lord Strathclyde
My Lords, I am sorry; I should have pointed out that those figures relate to senior executive pay and not to pay for company directors.

§ Lord Dormand of Easington
My Lords, does the Minister believe that the high increases to which I referred in my earlier question—I have a list of them—are damaging the Government's policy on wage restraint, particularly in relation to inflation?

§ Lord Strathclyde
My Lords, not if they are justified.

§ Lord Mackie of Benshie
My Lords, is the Minister aware that instead of disclosing his figures later when forced to do so, it would have been much more respectful to the House and better for his reputation if he had produced them at the start?

§ Lord Strathclyde
My Lords, I did not refer to any figures concerning directors' pay. The figures to which I referred came from a CBI pay survey concerning senior executive pay and had nothing to do with the Question. I do not feel that I have been in the least disrespectful to the House.