Vince Cable talks tough on top pay and 'short-termism'

• Vince Cable: tough words for his CBI audience Picture: Getty Images

In a speech to the CBI annual conference focusing on the creation of a stable fiscal and business environment, Cable told business leaders he remained concerned about excesses and behaviour in companies.

He said he wanted shareholders to aid decision making in the boardroom, accusing many fund managers of being too focused on the short term and on takeovers. He said he was worried "that too many are driven by short-term financial incentives".

Cable announced an inquiry entitled A Longterm Focus for Corporate Britain and said it would also look at executive remuneration.

He referred to outgoing CBI director-general Richard Lambert's comment some months ago that if big business leaders seemed to occupy a different galaxy from the wider community on pay they risked being treated as "aliens".

Cable noted that chief executives' remuneration rose 15 per cent per year in the decade from 1999 to 2008, even though there was a 3 per cent fall in the FTSE 100 over the same period.

"Compare this to average earnings growth of 4 per cent. So perhaps it is time to return to Earth," he said.

The government wanted to know, he told the conference in London, whether investors were being informed enough about the basis on which managers were paid.

He said the government also wanted to ask whether shareholders should have "a binding vote on practices that may be against their interests".

He said he would not embark on another round of banker bashing aside from issuing a further warning to the banks and their highly-paid executives.

No-one listening to Chancellor George Osborne's statement last week "will be under any doubt of the government's collective determination to ensure that banks act in the interests of the wider economy," he said, " and that in the New Year they must not engage in another self-indulgent bonus round."Bob Diamond, president and chief executive-designate of Barclays, told the audience that banks realised their obligations to lend to get the economy moving again given that they had "benefited enormously" from the government's actions and stimulus to mitigate the financial and economic crisis.

However, Diamond said that while the majority of businesses seeking bank credit were successful, "the objective can never be to fulfil 100 per cent of demand for lending because that will simply sow the seeds of the next slump".

Prime Minister David Cameron told CBI members that the government wanted to pioneer a "new economic dynamism" to spur an exports-led recovery, as he unveiled "the first-ever national infrastructure plan", ranging from transport to broadband.

Ed Miliband, the Labour Party leader, warned against the government believing deficit reduction was a cure-all without learning the deeper lessons of the crisis, including the need for "a more balanced economy" not so dependent on financial services.