An obligatory requirement for a majority of the board to be independent non-executive directors;
A new dual voting procedure which will give minority shareholders more say in the appointment of independent directors;
A reduced willingness to allow exceptions to the minimum free float requirement of 25%.
Commenting on these measures, Simon Walker, IoD Director General, said:

“Allegations of financial malpractice or corruption should be treated extremely seriously by the regulatory authorities and properly investigated. However, these allegations are entirely separate to issues of ownership structure and do not justify knee-jerk calls for more regulation.

“If implemented, the UKLA’s proposals would create a listing regime that discriminates against companies with large controlling shareholders – some of which are among the world’s most admired and successful companies – and undermine the UK Corporate Governance Code, whose flexible ‘comply or explain’ approach is widely supported by boards and investors.

“Such rules would also send a negative signal to international companies with committed family shareholders and strong growth prospects. Such long-term oriented enterprises should be welcome in London if they are willing to embrace our exacting transparency and ethics requirements.”

“The Government has lost its last chance to introduce legislation to unleash business before the next election. The National Insurance cut announced at the Budget will reduce the cost of employing staff for small businesses and the flat-rate state pension will benefit modest earners, but the Deregulation Bill is a missed opportunity. It does little to cut back red tape for employers and nothing to tackle the problem of ‘gold-plated’ EU regulation.”

Before the Queen’s Speech, the IoD called for much more extensive deregulation to boost business and the economy.

On individual areas of the Queen’s speech

National Insurance:

The Chancellor announced at the Budget that from 2014 employers would not have to pay the first £2,000 of employers’ National Insurance contributions. In a recent survey of IoD members, over 70% said the move was positive for their business, with a third saying it would encourage them to hire new staff. The Policy Voice poll of 1,135 IoD members ran from Monday 26th March until Friday 5th April 2013.

The flat-rate state pension:

The IoD has long argued for a flat-rate state pension to reduce complexity in the system and give modest earners the incentive to save for their retirement. However, it seems that the Government may intend to provide a lower state pension for workers who contracted out of the state second pension. While it is true that these people paid lower National Insurance contributions, they also took their pension liabilities off the Government balance sheet and bore the investment risk themselves.

HS2:

Decisions on the biggest rail investment ever in the UK must be coordinated with decisions on airport capacity, not taken separately. If Heathrow is to remain the UK’s main hub airport, HS2 must run directly through it. High speed rail will rightly connect Birmingham and Manchester airports – it should run through our biggest airport as well.

“The UK’s infrastructure is in dire need of an upgrade, but government dithering is holding back urgent improvements. For schemes that need funding, capital expenditure has been cut too far, putting too much of the burden on users. Projects that should be ready to go are being held up in the planning system. And government indecision is preventing schemes that don’t need a penny of taxpayers’ money, such as a third runway at Heathrow, from going ahead altogether.”

“It is good news that the Government’s proposals on employee ownership and workplace regulation have been approved by Parliament. It is important to generate innovative new ways to improve flexibility in the workplace and promote shareholding by employees. It’s now up to employers and their workforces to decide how best to use this new partnership.”

“The benefits cap establishes a sensible principle, that welfare should not pay more than working. It is morally wrong as well as economically damaging to have a benefits system that prices employers out of the market. This is a welcome move which helps with the crucial work of reducing the deficit at the same time as improving the economy and righting a long-standing injustice.”

“I was deeply saddened to hear of the death of Baroness Thatcher, and the IoD offers its condolences to her family. She was a great example of a strong leader, and broke new ground for female leaders in particular. Britain was privileged to have a Prime Minister who understood the importance of entrepreneurs, aspiration and business. She will be sorely missed.”

“This is a good day for business and individual taxpayers. Cutting the failed 50p rate of tax is a welcome step, and will attract entrepreneurs and encourage success in British business. Raising the income tax threshold ensures work is rewarded, and is good news for millions of low earners. Cutting Corporation Tax completes the set, helping to make Britain a more competitive place to do business. George Osborne has done the right thing in lowering the tax burden – long may it continue.”

“We applaud this budget. The Chancellor has stuck to his guns and held his nerve – which is exactly what we wanted to see. Deficit reduction is not an optional policy, it is an absolute necessity, and he is right to reject the siren calls to abandon it.

“Businesses will be glad that George Osborne has also continued the downward pressure on Corporation Tax. Britain must become the most competitive place to do business, and lower taxes will attract welcome investment from abroad.

“The new allowance to reduce the tax on employing people is a welcome boost for businesses who are working hard to grow. The private sector has done a huge amount to improve the employment figures, and it is right that they are rewarded for doing so. This will see more people helped out of unemployment, which is a very good thing.

“We have long called for a co-ordinated set of policies to encourage the development of a UK shale gas industry. The Chancellor is absolutely right to set attractive conditions for shale exploration – this will create thousands of jobs, and reduce our reliance on expensive foreign imports.”

Simon Walker, Director General of the Institute of Directors, said:

“George Osborne has done difficult, essential work so far in taking on Britain’s bloated state and crushing deficit. Chancellors should be judged on the tough decisions they make – not their popularity in the polls – so he must not budge an inch on the crucial job of deficit reduction. He also deserves praise for recognising that deficit reduction must be backed up by improved competitiveness, achieved through measures such as lower Corporation and Income Taxes.”

“This budget is the time to build on his work so far with radical steps to make Britain the best place in the world to do business. He must ensure that where money is available for investment it is focused on specific priorities, not frittered away on a wide range of special interest schemes.”

“Our economy will return to growth when the energy and expertise of British business is unleashed, and international investment is attracted. On Wednesday, the Chancellor has the chance to make that happen with a clear signal that Britain is the place to do business – and he should seize it with both hands.”

It is not merely a question of presentation, he added. Capitalism’s strength is that is based on the decisions of millions of consumers, leading companies to create the goods and services that people want at reasonable prices. Business fails society when instead its efforts are focused on manipulating markets for cynical gain. If business is to regain the trust of the public, and avoid misguided intervention from Government, it must eradicate this unacceptable behaviour.

The text of the speech is below:

“We have a constant job to do in the media and in Westminster to combat bad ideas and to promote good public policies intended to create a more beneficial business environment in the UK.

“But it would be irresponsible to think that successfully representing business simply involves a closed conversation between those with legislative power and the business community. Indeed, the biggest challenge for business that this century has offered so far is one of public confidence.

“We all know what a battering the free market, and the principle of for-profit business has come in for in the last few years. There have always been critics of capitalism, and there always will be, but the discontent has clearly spread well beyond the professional anticapitalists in their Occupy tent cities and into the wider population.

“That is a serious cause for concern. The wider population are starting to become concerned, incensed even, by the perceived failings of private business. These are the people who make up our work force, our consumer base and often our investors through their pension funds and other routes.

“Capitalism’s strength is that it is a system based on consent, not compulsion. Every minute of every day the people have the power to reform and refine it by the mass referendums of their purchasing decisions. Every basket of goods at the supermarket checkout is a collection of votes cast for different products, brands and trends. Each day sees new data flow back into companies about what people want and what they don’t want.

“Those voters are now starting to question the system itself. And that is understandable.

“Most companies do the right thing, work hard for decent but not excessive rewards, serve their customers and end the year with sustainable growth in return for a job well done.

“But those are not the firms who are hitting the headlines. At the weekend, we saw reports that 521 members of staff at Barclays and RBS earn more than £1 million a year. Thousands of people in those two companies alone earn more even than the Prime Minister. This is in scandal-hit companies who have had a far from successful year.

“Now I recognise that Anthony Jenkins and Sir David Walker at Barclays are working hard to introduce a new culture in Barclays in particular. And as you can imagine given my job, I’m not a rabid anticapitalist. But even I believe that this state of affairs is unacceptable. Shareholder value has been destroyed, capitalism has been given a bad name, key measures of the market have been manipulated for cynical gains, taxpayers have shelled out billions to bail banks out, and yet vast rewards packages are still being handed out.

“That is why I think it is understandable that many people are concerned about the state of rewards for failure, and the disastrous effects of short-termism in some businesses. Many IoD members are concerned about exactly the same things.

“People outside the communications industry sometimes think that it is possible to spin anything – that the proverbial turd can indeed be polished, if you’ll pardon the metaphor. But sometimes it can’t – sometimes the underlying facts are the problem, and there is nothing that cunning presentation can do about it other than make it worse. Sometimes the best communications advice has to be to change the behaviour that is inviting bad publicity.

“The IoD’s role is to promote good business, not simply defend everything that any business does. To defend the reputations of the millions of businesses who do the right thing, we must call out those who do wrong. To represent good business, we must set right the failings which have allowed some to go bad. Most importantly, to secure the future for a free market, entrepreneurial economy in the UK, we must ensure that there is a voice for good business out there, fighting to improve our economic system.

“If we do not do those things, then the justified public revulsion will end up spilling over into cack-handed and hugely damaging government action. That would devastate good and bad businesses alike, which none of us wants. Just look at the EU’s bonus cap – wrong-headed and counter-productive as it is, the behaviour of some of our banks makes it difficult for anyone to stand at their side to credibly fight against it. They are harming the whole of British business by focusing only on their own short-term self-interest.

“That has to change, and it is the IoD’s responsibility to make the case for reforming capitalism and capitalism’s reward structures in order to make it happen – and to communicate to the public what genuinely good businesses look like. That is key to the delivery of better business in the UK.”