The Tanaiste, Ms Harney, believes the disclosure of individual plc directors' remuneration is desirable even if it leads to demands for pay rises from staff at below board level.
Ms Harney, in a letter to the chairman of the Stock Exchange, Mr David Kingston, said keeping the details of individual directors' remuneration "secret" in order to stop below-board demands for pay increases "could be regarded as deliberately lacking transparency to avoid criticism".
She was responding to a letter Mr Kingston wrote to her on March 1st, outlining the reasons why the Exchange decided not to make the disclosure of individual director's remuneration mandatory in amendments it made to its rules last year. Mr Kingston's letter to Ms Harney was sent just days before she issued a public warning that she would introduce legislation forcing disclosure of individual director's remuneration if the Stock Exchange did not introduce the measures into its rules.
The reasons given by Mr Kingston for not opting for disclosure last year included "the needs of quoted companies to be able to pay different amounts to individual directors without this being highlighted publicly, or even known by the individuals concerned".
Another reason was that a requirement for individual disclosure "in a small business community would be an enormous disincentive to companies considering going public."
In drafting new rules for the Stock Exchange late last year the Exchange consulted market users on what was the most appropriate form of disclosure, and opted for the disclosure of the aggregate remuneration of directors, broken down into executive and non-executive directors, Mr Kingston said.
Copies of Mr Kingston's letter and the Tanaiste's reply were released following a Freedom of Information request. Mr Kingson's letter was written just days before the Tanaiste launched new guidelines from the Irish Association of Investment Managers which recommend the disclosure of individual director's remuneration. Mr Kingston wrote that he was aware of the content of the new guidelines and that Ms Harney was to launch them.
The Stock Exchange is currently canvassing quoted companies for their views on the issue. It is likely most will argue against the move. However the Exchange has asked the companies to come up with "realistic alternatives" and stressed it would be preferable to have proposals to put to Ms Harney, than to risk the imposition of legislation on the issue. It is thought likely the Exchange will impose disclosure under its own rules, rather than risk Ms Harney introducing legislation.
In April the president of the Institute of Directors in Ireland, Dr Paddy Galvin, said disclosure would "serve no purpose and would inevitably be pay inflationary." He said disclosure was a "very sensitive issue" for the individuals concerned, of whom he said there were about 200.
In 1994 the Company Law Review Group recommended that the minimum information to be disclosed should be individual directors' remuneration, aggregate figures for the performance element of individual executive directors remuneration, and detailed information on share option schemes. The group recommended that disclosure be required by law.
