Labour urges 'better capitalism'

7 January 2012 Last updated at 08:50 ET

 

Chuka Umunna called for the government to "foster better business practice" to create a "better capitalism"

Labour has called for "more responsible and better capitalism" and policies to tackle excessive executive pay.

Shadow business secretary Chuka Umunna said increasing transparency was the key to addressing high salaries.

His comments echoed those of Labour leader Ed Miliband who has challenged David Cameron to match Labour's pledges on the issue.

The coalition is expected to announce its policies on executive pay later this weekend.

In an interview with the Guardian, Mr Miliband said: "If one of the big battlegrounds of British politics is going to be who is really going to take action on executive pay, I say 'bring it on'. I promise you they are not going to steal a march on us in this area.

"Does anyone really believe that David Cameron came into politics to create a more responsible capitalism? The public are not going to buy it."

Mr Miliband's comments follow criticism that he does not have a credible economic plan.

Labour peer Lord Glasman said the party "show no signs of winning the economic argument" under Mr Miliband, in an interview with the New Statesman earlier this week.

Transparency

Labour's measures to tackle high executive pay include increasing transparency by simplifying remuneration packages.

Companies should also publish a pay ratio between the highest paid executive and the company median average - and the government could publish a league table highlighting the biggest pay gaps.

Accountability could be promoted by putting an obligation on investors and pension fund managers to disclose how they vote on remuneration packages.

Labour also wants a repeat of the bank bonus tax - to increase "fairness".

Mr Umunna said excessive executive pay was "symptomatic" of the "kind of capitalism that has grown up in this country over the last 30 years".

Explaining what he meant by "responsible capitalism" he said: "It's about looking at what we can do to foster better business practices, behaviour, successful business models that tackle unfairness, and the cost of living crisis at home, the problems we're finding domestically, and actually produce more competitiveness for British companies abroad."

"It's about saying the status quo that's existed is no longer serving businesses and people in society."

'Undermines trust'

Labour was not against people being rewarded for taking risks and creating jobs, he explained.

But there was a problem when pay awards appeared to "bear no relation to performance" - a situation that "undermines trust in the whole system", he said.

Labour said it accepted in full the recommendations of the High Pay Commission and urged ministers to do the same.

The commission was set up by pressure group Compass, with backing from the Joseph Rowntree Charitable Trust, to investigate boardroom pay.

Its year-long inquiry found that the pay of top executives at a number of FTSE companies had risen by more than 4,000% on average in the last 30 years - and said the disparity between what top executives and average workers earn has been building for many years.

Deputy Prime Minister Nick Clegg said in December the government would announce new plans to "get tough" on excessive boardroom pay in January and may legislate if necessary.