By Tim Montgomerie
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Most Tory MPs were relatively positive about what Vince Cable said yesterday afternoon about executive pay. A couple, however, were indignant and a little bit silly…
Philip Davies: "I have heard some drivel in my time, but I do not think that in all my years in opposition I heard as much drivel from the Treasury Bench as I heard from the Secretary of State today."
Peter Bone: "The liberal, left-wing clap-trap that he has announced today—which even Labour did not do, in 13 years—has somehow got through the coalition in the hope of a good headline."
Both interventions strike me as knee-jerk libertarianism and they ignore the important role that law plays in setting the rules of the free market game.
Allister Heath of City AM – a staunch defender of the free enterprise system – certainly understands this and welcomes Cable's reforms in today's edition of his newspaper as pro-shareholder:
"The substantive changes announced yesterday are pro-capitalist and give shareholders more clarity and power. Boards work for their owners and that is how it should be; reasserting and strengthening that link is the best way to prevent rewards for failure… It is great that notice periods of more than a year will have to be ratified by shareholders; again, this will reduce payoffs for failure and some of the extreme termination payments that have done so much damage to the City’s reputation. I would have gone further: for example, shareholders could be responsible for directly appointing members of the remuneration committee. But – inflammatory rhetoric aside – at least Cable hasn’t really made any existing failings much worse (apart from a few minor and ultimately irrelevant nods to form-ticking and to fake diversity) and has actually proposed some real improvements. The devil will be in the detail but on balance these are a decent set of reforms."
Mark Field MP correctly argues today that the Business Secretary should have done more to tackle 'rewards-for-failure' but, on balance, Cable's reforms are helpful – particularly because the PM and Chancellor stopped his ambition to stuff boards with employee representatives. Tory MPs are right to be sceptical about government intervention in markets but they should be at least as worried about doing nothing about market failures that bring the capitalist system into disrepute.