Yesterday's comments by the Rt. Hon. Harriet Harman QC MP concerning Sir Fred Goodwin's pension have been widely reported. Ms Harman provided this eminently quotable statement concerning the pension agreement: "...it might be enforceable in a court of law, this contract, but it is not enforceable in the court of public opinion and that is where the government steps in". This has been interpreted by some as an indication that the Government may legislate to reduce Sir Fred's pension entitlement. The difficulties with such an approach - which would involve rewriting contracts - were rehearsed several years ago when the Company Directors’ Performance and Compensation Bill 2002-03 was introduced in Parliament as a Private Members' Bill by Archie Norman MP. The Bill would have resulted in directors' compensation for loss of office being subject to a test of reasonableness in the light of any failure by the director. It did not receive Government support (see here) and was killed off at Second Reading (see Hansard for the controversial way in which this was done: HC Deb 31 January 2003 vol 398 cc1147-8). Nevertheless, the Government introduced a mandatory advisory vote for the shareholders of quoted companies with regard to the company's remuneration report (see, now, Section 439 of the Companies Act (2006)).
Of relevance to the current debate was the opinion of the then Parliamentary Joint Committee on Human Rights with regard to Archie Norman's Bill. The Committee explained that the Bill:
Of relevance to the current debate was the opinion of the then Parliamentary Joint Committee on Human Rights with regard to Archie Norman's Bill. The Committee explained that the Bill:
... appears to make it possible to deny payment of money legally due to a director, interfering with the director's right to peaceful enjoyment of possessions and depriving the director of property protected by Article 1 of Protocol No. 1 to the [European Convention on Human Rights]. The Committee is concerned about the possibility that this might be incompatible with two sets of rights under that Article: first, the right of the director to money legally due to him or her; secondly, the right of the company to use its property and enter into contracts as seems best to it. Under Article 1, compensation for a deprivation of property in the public interest is required save in exceptional circumstances, and any control on the use of property must strike a fair balance between the rights of property owners and the general public interest (which may itself demand compensation in some circumstances)."
I agree with you. It would be very difficult to legislate to expropriate an existing legal entitlement. My preferred alternative would be a tax rate of 80% on all pensions over £100,000. We could call it the Goodwin tax to ensure Sir Fred's immortality.
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