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CBI President warning over government “meddling” in business

Sir Roger Carr, president of the Confederation of British Industry, has suggested that extreme government intervention in corporate governance and executive pay could send out the wrong message about British business.

At a YouGov-Cambridge Symposium in London this morning, Sir Carr is due to give a speech which will warn against measures which may portrait Britain as “closed for business.”

He will acknowledge the need to address the failure of banks in remuneration control, self control and shareholder engagement, but will urge caution against “meddling.”

To the symposium, he will say: “Less is often more and government must avoid believing the bureaucracy is an antidote to bad behaviour.

“The suggestion that shareholder approval may be required for settlements on outgoing directors in excess of 1 year’s remuneration appears reasonable in principle – subject to practicality - in the increased spirit of openness between owner and manager.

“But the exam question remains “would coalition plans for shareholder empowerment make any difference to corporate excess or growth?”

“There is no doubt that the economic trauma we experienced in the West, shook the beliefs of many – on fairness, wealth distribution and personal values – and shook them to the core.

“The groundswell of public opinion initially aimed at bankers, spread to corporates, and the mood was picked up by politicians.

“Politicians and regulators then fanned the flames of discontent with anti business rhetoric and sought to quench the fire they had fuelled with controlling legislation.

“Public opinion has already started to adjust behaviour – individuals forsaking bonus payments – companies vying for customer goodwill in their public commitments to self discipline in pay and transparency of performance.

“The tide is turning and legislation and code adjustment will reinforce the message – providing it is balanced and sensible.

“Most businesses know that good governance and growth are not mutually exclusive and that doing the right thing is invariably the right thing to do in business.”

On the topic of remuneration, Sir Carr is expected to highlight the perceived dangers in intervention in pay, suggesting goodwill could impact on talent, reward, entrepreneurial drive and ambition.

He will say: “Reward structures are a function of markets, not morals. High rewards for mediocre performance are unacceptable and any reward for failure is intolerable – but the check and balance of RemCos and boards that exist, supported by additional transparency and annual voting on directors should be enough to do the job.

“On balance, I am hopeful that common sense will prevail and we will emerge from a long period of consultation that will reflect sensible adjustment, not draconian change – an outcome that should comfort the doubtful and discipline the process, without demotivating the wealth creators.”

In his closing remarks, he will add: “In achieving success or controlling excess, it is the quality of the individual that is the determining factor. Government should set the climate, allowing business to deliver the goods.

“In corporate governance rules provide the framework – people make the difference.”

This was posted in Bdaily's Members' News section by Tom Keighley .