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Executives may rue the day BP ignored investors over Dudley pay Executives may rue the day BP ignored investors over Dudley pay
(about 2 hours later)
The last time MPs became interested in boardroom pay at public companies, the result was more than 12 months of intense debate that culminated in shareholders being given a binding vote from 2014.The last time MPs became interested in boardroom pay at public companies, the result was more than 12 months of intense debate that culminated in shareholders being given a binding vote from 2014.
But, in practice, the supposedly binding ropes were tied only loosely. The votes happen only every three years – rather than annually as the then business secretary, Vince Cable, had originally proposed – and the binding element applies only to the setting of pay polices. Votes on the actual implementation of the policies continue to be advisory.But, in practice, the supposedly binding ropes were tied only loosely. The votes happen only every three years – rather than annually as the then business secretary, Vince Cable, had originally proposed – and the binding element applies only to the setting of pay polices. Votes on the actual implementation of the policies continue to be advisory.
That is why BP, for example, doesn’t have to give a damn about last week’s 59% rebellion against its pay report. The vote was of the advisory variety and boss Bob Dudley can keep his £14m if he wishes. If, in practice, BP’s remuneration chairwoman, Dame Ann Dowling, has to be thrown overboard to pacify the revolting shareholders, the oil company will have little difficulty in finding an equally tame replacement.That is why BP, for example, doesn’t have to give a damn about last week’s 59% rebellion against its pay report. The vote was of the advisory variety and boss Bob Dudley can keep his £14m if he wishes. If, in practice, BP’s remuneration chairwoman, Dame Ann Dowling, has to be thrown overboard to pacify the revolting shareholders, the oil company will have little difficulty in finding an equally tame replacement.
But BP – and public companies in general – can’t be surprised if MPs feel this is hardly true to the Cable philosophy that shareholders would be better police officers on pay if they were armed with extra powers. Rather, the BP case shows that the balance of power has barely shifted: brazen boards can still baffle their shareholders with complex pay structures and then pay perverse sums.But BP – and public companies in general – can’t be surprised if MPs feel this is hardly true to the Cable philosophy that shareholders would be better police officers on pay if they were armed with extra powers. Rather, the BP case shows that the balance of power has barely shifted: brazen boards can still baffle their shareholders with complex pay structures and then pay perverse sums.
Simon Walker, director general of the Institute of Directors, was right to say last week that if the will of shareholders is ignored “it will only be a matter of time before the government introduces tougher regulations on executive pay”.Simon Walker, director general of the Institute of Directors, was right to say last week that if the will of shareholders is ignored “it will only be a matter of time before the government introduces tougher regulations on executive pay”.
As it happens, the energy committee decided on Tuesday not to summon BP directors to explain their thinking. But it was probably the wrong committee for the job anyway. There is nothing to stop a different set of MPs – the business bunch, for example – from investigating, especially if the BP revolt is mirrored elsewhere. That would be a welcome development. Cable’s reforms were meant to settle the matter for a generation and quell public anger. Two years later, the same old problems have returned, and now the numbers are even bigger.As it happens, the energy committee decided on Tuesday not to summon BP directors to explain their thinking. But it was probably the wrong committee for the job anyway. There is nothing to stop a different set of MPs – the business bunch, for example – from investigating, especially if the BP revolt is mirrored elsewhere. That would be a welcome development. Cable’s reforms were meant to settle the matter for a generation and quell public anger. Two years later, the same old problems have returned, and now the numbers are even bigger.
Government’s blurred nuclear vision remains despite Amber lightGovernment’s blurred nuclear vision remains despite Amber light
Terrific news, it doesn’t matter if EDF and the French government decide they can’t afford to build Hinkley Point C, the enormous £18bn nuclear project set for Somerset. We can cope even if construction starts and is then delayed, which given EDF’s record with its European pressurised reactors (one is four years behind schedule, the other nine years) is not an academic consideration.Terrific news, it doesn’t matter if EDF and the French government decide they can’t afford to build Hinkley Point C, the enormous £18bn nuclear project set for Somerset. We can cope even if construction starts and is then delayed, which given EDF’s record with its European pressurised reactors (one is four years behind schedule, the other nine years) is not an academic consideration.
The source of this confidence is the energy secretary, Amber Rudd, writing to the energy select committee. “We have arrangements in place to ensure that any potential delay or cancellation to the project does not pose a risk to security of supply for the UK,” she said. “I am clear that keeping the lights on is non-negotiable.”The source of this confidence is the energy secretary, Amber Rudd, writing to the energy select committee. “We have arrangements in place to ensure that any potential delay or cancellation to the project does not pose a risk to security of supply for the UK,” she said. “I am clear that keeping the lights on is non-negotiable.”
What’s more, Rudd is right to be confident. Hinkley, even if everything proceeds to plan, won’t produce a single megawatt of power until 2025, which leaves time to put alternative arrangements in place. It takes about two years to chuck up a gas-fired power station, for example, and off-shore wind could also play a role.What’s more, Rudd is right to be confident. Hinkley, even if everything proceeds to plan, won’t produce a single megawatt of power until 2025, which leaves time to put alternative arrangements in place. It takes about two years to chuck up a gas-fired power station, for example, and off-shore wind could also play a role.
The chief difficulty, as analysts like Jefferies’ Peter Atherton always point out, would come in meeting the UK’s targets to reduce greenhouse gas emissions by 2030. If most of the non-Hinkley nuclear stations in the planning pipeline went ahead, there would be a small problem; if the entire new-nuclear programme ground to a halt, the challenge would be more severe. Rudd makes a similar same point. The chief difficulty, as analysts such as investment bank Jefferies’ Peter Atherton always point out, would come in meeting the UK’s targets to reduce greenhouse gas emissions by 2030. If most of the non-Hinkley nuclear stations in the planning pipeline went ahead, there would be a small problem; if the entire new-nuclear programme ground to a halt, the challenge would be more severe. Rudd makes a similar same point.
Yet her letter triggers a sinking feeling. The main conclusion to be drawn is that, in theory, UK still has time to escape the economic insanity of Hinkley and put in place an alternative plan to address the 2030 targets while also keeping the lights on. It wouldn’t be easy, but it could be done. Instead, the government is obsessed with paying a sky-high price to an over-stretched company that can’t get its new technology to work. Yet her letter triggers a sinking feeling. The main conclusion to be drawn is that, in theory, UK still has time to escape the economic insanity of Hinkley and put in place an alternative plan to address the 2030 targets while also keeping the lights on. It wouldn’t be easy, but it could be done. Instead, the government is obsessed with paying a sky-high price to an overstretched company that can’t get its new technology to work.
Commons veto on FCA pick is great but was no Osborne compromiseCommons veto on FCA pick is great but was no Osborne compromise
A small but noteworthy advance for parliamentary democracy: from now on, the Commons can veto the chancellor’s pick for the job of chief executive of the Financial Conduct Authority (FCA).A small but noteworthy advance for parliamentary democracy: from now on, the Commons can veto the chancellor’s pick for the job of chief executive of the Financial Conduct Authority (FCA).
Andrew Tyrie, chair of the Treasury select committee, has been lobbying for this change ever since Martin Wheatley’s messy exit from the FCA last year. Wheatley was told by George Osborne that his contract would not be renewed, provoking fierce accusations of political meddling with an important City regulator. Andrew Bailey was eventually switched from Bank of England to fill the hole.Andrew Tyrie, chair of the Treasury select committee, has been lobbying for this change ever since Martin Wheatley’s messy exit from the FCA last year. Wheatley was told by George Osborne that his contract would not be renewed, provoking fierce accusations of political meddling with an important City regulator. Andrew Bailey was eventually switched from Bank of England to fill the hole.
The FCA job will now come with a renewable five-year contract and the Treasury committee will be able to force a vote in Commons on an appointment. As Tyrie says, parliament “will now be better placed to safeguard the FCA from interference – or the perception of interference – by the Treasury or Treasury ministers”. Good.The FCA job will now come with a renewable five-year contract and the Treasury committee will be able to force a vote in Commons on an appointment. As Tyrie says, parliament “will now be better placed to safeguard the FCA from interference – or the perception of interference – by the Treasury or Treasury ministers”. Good.
Only a cynic would suggest that Osborne agreed to this restraint because he’ll never have to appoint another chief executive of the FCA.Only a cynic would suggest that Osborne agreed to this restraint because he’ll never have to appoint another chief executive of the FCA.