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Lord Smith of Clifton: My Lords, will the Government honour the undertaking given by Mr Stephen Byers, when he was at the DTI, that he would produce a code of conduct regarding the remuneration packages of directors? Twice in the previous Parliament I asked that question and I was fobbed off with the answer, "Soon". The last time that I asked the Minister was over a year ago. Will the Government please have some care for the preservation of the English language or will they continue to procrastinate, bearing in mind the situation? It is a thorny issue but it is getting out of hand.
Lord Sainsbury of Turville: My Lords, consistently the Government have made it clear that they will produce their views on the matter of accountability as soon as the Company Law Review's wider recommendations on the issue have been made. That report is now with the Secretary of State and when she has had time to consider it, she will come forward with government proposals on this key area.
Lord Marsh: My Lords, does the Minister agree that the concern about the salaries of senior executives in major companies extends to companies such as football companies and possibly to pop radio stations? Most footballers and popstars receive considerably more than many directors.
Lord Sainsbury of Turville: My Lords, the same principle applies to those companies as to others. Essentially, how shareholders want to see their money used is a matter for them.
Lord Dubs: My Lords, would my noble friend care to distinguish between remuneration that comes out of the profits of companies and remuneration that has a significant input from taxpayers?
Lord Sainsbury of Turville: My Lords, I believe that shareholders should deal with remuneration resulting from company profits, but in a transparent manner and with accountability to shareholders.
Baroness O'Cathain: My Lords, how does the Minister expect transparency to be increased? At the moment the transparency required for executive directors, as reported in the annual report and accounts of every company by the remuneration committee in the remuneration report, gives every detail possible. I just wonder what more will be imposed on companies.
Lord Sainsbury of Turville: My Lords, as I am sure that the noble Baroness knows, Stephen Byers made a clear statement on this subject. One major step forward would be clearer statements about the performance of a company, as happens in America, and to give effect to what the Greenbury report asked for, which was a clear statement on remuneration policy. As she knows from her careful scrutiny of many company accounts, that is very infrequently carried out.
Lord Peyton of Yeovil: My Lords, in applying their minds to this important matter, is it too much to hope that the Government may give some thought to the meaning of the word "bonus" that, of late, has got out of control? Perhaps they could take the opportunity to make it clear that the word does not always have a big ingredient of merit.
Lord Sainsbury of Turville: My Lords, I totally agree with the noble Lord. The prime issue is that there should be a clear link between the performance of a company and an individual director and the remuneration that he or she receives; therefore, where performance is poor or mediocre large bonuses should not be given.
Lord Phillips of Sudbury: My Lords, given that there are, by any reckoning, hundreds of people earning packages of £1 million plus a year, how can the Government be indifferent to the impact of that on differentials, particularly as they affect the public services? As they pretend to be concerned about education and teachers, do they believe that such a state of affairs is gravely damaging to the recruitment of teachers and, for example, to the availability of affordable housing for public service workers in London?
Lord Sainsbury of Turville: My Lords, the Government are not indifferent to any of these issues,
nor to the action that should be taken to deal with them. Ultimately, it is for the shareholders, whose money is involved, to make the judgments through the remuneration committees on what payment should be made.
The Earl of Northesk: My Lords, what view do the Government take of directors exercising share options at reduced levels to discount a falling share price?
Lord Sainsbury of Turville: My Lords, if there is such an issue--if I understand it at all--any action that is in any way out of line with company law would be a matter for the Financial Services Authority.
Lord Watson of Richmond: My Lords, does the Minister consider that the desirable relationship between remuneration and reward exists in the recent case of Railtrack?
Lord Sainsbury of Turville: My Lords, again that is a case for the shareholders of Railtrack. In this case, I am delighted that it will be on the agenda for the AGM, where no doubt the shareholders can express their views.
Lord Naseby: My Lords, does the Minister recognise that, although we have had Greenbury, Hampel, Turnball and Cadbury, and while there may be codes of conduct, in recent times there have been too many instances, particularly regarding the renegotiating of stock options, that do not find favour with shareholders, with the public and with anybody other than those who benefit directly? If there is to be a review, perhaps that can be one of the first subjects to be examined.
Lord Sainsbury of Turville: My Lords, that is the point of the decision that we are to take on the accountability to shareholders. Clearly, on occasions when there is genuine concern by shareholders as to the remuneration practice of a company, the fact that they are not always given the opportunity to make their feelings known at the AGM is not satisfactory. That is exactly the issue that we shall consider when we bring forward the proposals on accountability.
Missile Defence Systems
3.6 p.m.
Lord Judd asked Her Majesty's Government:
- What arrangements they are making to evaluate the relevance of a missile defence system to their national and international security priorities, with particular reference to the outcome of the last defence review.
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Bach): My Lords, consistent with the Strategic Defence Review, we continue to assess the potential role of missile defence systems as
part of a broad ranging response to missile and weapons of mass destruction proliferation. Our position of monitoring developments, both in the threat and in defensive technologies, our involvement in NATO studies and our dialogue with allies all help us to make informed judgments on security priorities. But it would be premature to decide to acquire a ballistic missile defence capability.
Lord Judd: My Lords, I thank my noble friend for that reply. Does he agree that any missile defence system will have immense expenditure implications, with far-reaching consequences for our existing defence strategy introduced after the recent defence review? Therefore, does he also agree that it is absolutely essential that, before we drift into any commitment from which it may be increasingly difficult to extricate ourselves, there is a convincing threat analysis that demonstrates why such a system is necessary and could be effective? Does my noble friend agree that we must be clear about the consequences for arms control and disarmament, which must remain a cornerstone of global security? Is not terrorism, in its nuclear, biological and chemical dimensions, a much more immediate threat? Is that being addressed adequately?
Lord Bach: My Lords, there will be no drift at all into such a defence system. Perhaps I may quote from the SDR published some three years ago. It states that systems,
- "may play a role within a balanced spectrum of capabilities to counter the risks posed by chemical and biological weapons and their means of delivery. But technologies in this area are changing rapidly and it would, at this stage, be premature to decide on acquiring such a capability".
- "We will, however, monitor developments in the risks posed by ballistic missiles and in the technology available to counter them, participate in NATO studies, and work closely with our Allies to inform future decisions".
Baroness Williams of Crosby: My Lords, in the course of such monitoring, has the Minister come across the recently published internal US Defence Department study that indicates that the testing of missile defences is, first, long-delayed, secondly, subject to a high level of failure, and, thirdly, does not take into account the use of sophisticated decoys? Has he seen the article in the contemporary issue of Foreign Affairs by Mr John Newhouse, an outstanding expert, who argues that the single greatest threat to global security arises from the growing and dangerous disrepair of the Russian strategic forces?
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