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Lord Sainsbury of Turville: My Lords, I certainly agree that there is concern about the rapid increase in executive salaries which do not clearly seem to be related to the performance of companies. This is an area of concern, which is why we propose to introduce the regulations. However, we believeit is common groundthat it is for the shareholders involved, both institutional and ordinary, to take action on this point.
Baroness Gardner of Parkes: My Lords, the Minister has previously given answers to me to the effect that the public are most concerned about people who go away with big money when they have failed. In the past he has said that it was a matter of contract and could not be altered. Do the Government have any plans to revise the law in such a way that there could be a clawback afterwards in such cases? This issue really annoys people.
Lord Sainsbury of Turville: My Lords, there clearly is an issue of contract. Most of these directors have contracts which have been freely entered into by the company and the particular director. The Greenbury report rightly pointed out that directors should take a robust view of a company's interest in circumstances
Lord Razzall: My Lords, following on from what the noble Baroness said, while recognising that the Government have sought consultation on this issue and that the view expressed by the Minister in relation to this questionwhich has been asked six times by the noble Lord, Lord Dormand of Easingtonhas always been the same, does he not accept that the world has changed and that there is a sense that people at the top level of British industry are being rewarded for non-competence rather than for breach of contract? Does he not accept that, as the world has changed, the Government should look again at their draft regulations to see whether they can set a framework under which this will no longer happen?
Lord Sainsbury of Turville: My Lords, I certainly agree that we have now entered a world where British executives can no longer claim to be underpaid in world terms. In fact, they are now the second highest paid in Europe after the Belgians. So there is no question now of saying that British chief executives are underpaid. However, that does not alter our view that this is essentially a matter for the shareholders. The role of government is to make certain that there is a framework which clearly sets out the basis of those rewards in order that average shareholdersin many cases today those will include employees of a companyhave the right to vote on the remuneration report at an annual general meeting. That is the way forward which gives accountability and transparency.
Lord Wedderburn of Charlton: My Lords, is my noble friend awareI am sure he isthat the proposed regulations require an advisory vote by shareholders, whoever they are? Is he further aware that there is now an overwhelming case for the mandatory introduction of failure clauses, of which the Institute of Directors recently said it had never heard? Such clauses would limit the law of contractwhich is not unknown in modern societyby providing that where a company has miserably failed, and the workforce and their families have suffered savage job cuts, directors and executives can no longer plunder a company where they have overseen failure.
Lord Sainsbury of Turville: My Lords, I am well aware that it is to be an advisory vote. I believe that it should be an advisory vote. It will be an extremely powerful signal to boards and to non-executive directors that shareholders are unhappy and will be taken very seriously. It has to be an advisory vote because if new directors are appointed to a board you cannot have a situation where, if they join during the year, they do not know whether the salary agreed with the company will be passed at the annual general meeting. The question of a failure clause comes down
The Earl of Onslow: My Lords, is it not true that if you join a company when the share price is £12 and you are sacked when the share price is 4½p, you have been in major breach of contract? You are not employed to reduce the share price from £12 to 4½p; you are employed to make the company prosper. Under those circumstances, surely the director concerned is in direct breach of contract and does not need to be paid a single farthing for his failure. No one minds about big money for big success, but they do object to big money for failure.
The Parliamentary Under-Secretary of State, Department of Health (Lord Hunt of Kings Heath): My Lords, guidance issued by the Secretary of State for Health under Section 7 of the Local Authority Social Services Act 1970 has statutory force and authorities would be open to judicial review if they failed to comply.
Lord Ashley of Stoke: My Lords, I am grateful for my noble friend's response. However, does he agree that deafblindness is a devastating dual disabilitya stunning disabilityand that it requires special measures? I am sure that my noble friend has checked his files in relation to this Question. Does he recall his letter to me on 29th September 2000, stating that Section 7 guidance was being issued by the Government, enjoining local authorities to assess deafblind people in their area and to provide the necessary services? The letter stated that the guidance was "legally binding". The disability organisation, Sense, which specialises in deafblindness, recently stated that many local authorities are doing very little, indeed practically nothing. What effective action will the Government now take?
My noble friend is right to point to the terrible effect that deafblindness can have on many people and on their families. That is why we issued the Section 7 guidance. I have seen the report by Sense, which is the result of a survey sent to parents of deafblind children in October 2001. It indicates some of the problems and deficiencies in the provision of services to date. However, the survey needs to be put into context. Local authorities were given a new responsibility from last April. My understanding is that they have responded to the new requirements. As a result of the statutory guidance, they will have a much better idea of the issues that they face at local level and will be able to offer an assessment where it is required by deafblind people or by their parents; and we can look to see the kind of improved services that my noble friend wishes to see.
Lord Hunt of Kings Heath: My Lords, the noble Lord is right. We expect local authorities to follow the guidance. We shall be monitoring their performance. If we come across cases in the next few months where local authorities are not following the guidance, we shall draw it to their attention.
Baroness Wilkins: My Lords, there can be no more isolating disability impairment than deafblindness. Does the Minister agree that local authorities should make the assessment and the one-to-one support services needed by deafblind children and adults their first priority in the provision of services? Is it not scandalous that provision under the Section 7 guidance is still very patchy throughout Britain?
Lord Hunt of Kings Heath: My Lords, I find myself in the unusual position of defending local authorities. It is fair to say that the guidance was issued only last April. In our view it is being implemented by local authorities. But, inevitably, it takes time to get the machinery into place. The whole point of the guidance was to give local authorities a much clearer idea of the problems and difficulties that they would have to face. The evidence that I have shows that local authorities are getting on with the job. One-to-one support is one of the factors that needs to be considered in the assessment that a local authority will be required to offer to a deafblind person if it is requested. We need to give the situation a few more months to settle down before we can make a decent judgment about how local authorities are doing the job.
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