The industry had little option but to welcome the government's move and the new director general Otto Thoresen was quick off the mark voicing broad support for the Prime Minister's proposals. He couldn't do anything else but there was more than a little caution in his remarks on BBC Radio 4 this morning. This is easy to understand.
He made the obvious calls for greater transparency in what is presented to shareholders and for this we will have to wait a little while for the detailed proposals to emerge from Vince Cable's business department. Mr Cameron had little or nothing to say on this yesterday, giving his announcement a rather superficial ring.
The real problem for the ABI, however, is that the government is trying to shift the responsibility for doing something about this issue - around which there is a lot of public anger - from its desk to somewhere else and the institutional shareholders look the most likely recipients. The potential for the Prime Ministerial vision of the vigorous assertion of shareholder power to turn into a nightmare for insurance and pensions funds seems considerable.
The first problem is not merely the lack of transparency in what is included in company reports but the fact that it is retrospective. Voting against a remuneration report at a company general meeting is little more than a slap on the wrists. After all, the report is about money that has been paid. There is nothing so far from the government that suggests shareholders will be given powers to stop excessive pay and bonuses before the money is handed over. This would require a fundamental overhaul of the composition of boards and especially remuneration committees and that is not something that is going to happen overnight.
There is some talk of creating powers to claw back money that shareholders do not think should have been paid but this sounds like a nuclear option and one that could, if exercised, lead to disputes finding their way into the courts.
We then have the challenge of deciding how much transparency should be introduced, how revealing it should be of individual's finances, how far down the executive ladder the harsh new spotlight should shine and how it will explain the complex packages that are now commonplace.
Even if you can tackle these problems - and there are proposals from a range of policy think tanks that offer some answers - the institutional shareholders will then have the challenge of managing public expectations. The institutional investors represented by the ABI are an influential group but they are not as powerful as they once were. A growing proportion of shares in British companies are now in the hands of hedge funds and overseas investors and they are going to be hard to engage in this debate, let alone convince to be become activist shareholders.
The ABI has a tough balancing act to perform as this debate gathers momentum. It would be a mistake for it to go to the government and demand too many new powers because that could raise public expectations of how much they might be able to achieve by using them. However, it has to be seen to be willing to take some responsibility for acting on behalf of the wider public whose money it is investing.
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