Anti-poverty firm attacked by MPs
The "extraordinary" £1m-a-year salary for the head of a government-owned
company set up to combat developing world poverty has been attacked by
MPs.
The salary of CDC Group chief executive Richard Laing rose from £383,000
in 2003 to £970,000 in 2007, the Commons Public Accounts committee
found.
But the Department for International Development, its 100% shareholder,
was not properly consulted, the MPs said.
Committee chairman Edward Leigh said oversight of CDC was "ineffective"
The committee also expressed concerns about CDC's decision to hold some
£1.4bn - over half its £2.7bn capital - within the UK, rather than
investing it abroad.
It also questioned why CDC's investments since 2004 had increasingly
been made in countries like China and India which were already
attracting foreign investors.
'Too narrow'
CDC invests in developing world businesses in support of DFID aims to
promote growth and show commercial investors that profits can be made in
such markets.
It invests in 600 companies, which together directly employ almost one
million people.
Although the fund management company is owned by DFID, it has not
received any funding from the government since 1995.
A recent National Audit Office report said it had demonstrated
"exceptionally good financial performance"
£1.1bn to £2.7bn since 2004.
But the PAC report said that there was "limited evidence" of CDC making
an impact on poverty reduction.
DFID's oversight "needs to be improved", the report added, warning that
the company's efficiency and business model were "questionable"
It noted that administrative costs were rising as a proportion of the
value of its portfolio.
However, the report welcomed recent agreement between DFID and CDC of a
"more stretching" investment policy.
This will require the company to limit new investments in China to small
and medium-sized enterprises which might otherwise have difficult
raising funds.
“ CDC is government-owned, but its obligations to report to the
Department for International Development have been weak ”
Edward Leigh MP
It also accepted that that the company's accumulation of £1.4bn in the
UK has been helpful in the current difficult economic climate, allowing
it to carry on investing in the developing world during the downturn.
Nonetheless, it criticised the decision of the CDC board's decision to
bring pay structures for senior executives in line with highly-paid fund
managers in the commercial sector.
This had resulted in "extraordinary levels of pay in a small publicly-
owned organisation charged with fighting poverty", the report concluded.
This had not been approved by DFID until after it was introduced, and
was based on "dubious" comparisons, it added.
The report said: "Besides enjoying the security of working in a
publicly-owned body, CDC executives do not have to compete for money to
invest.
"And the pay arrangements take too narrow a view of performance, with
too much emphasis on financial performance and too little on poverty
reduction."
Mr Leigh said CDC Group had proved it was very good at turning a profit.
But he added: "We need to know, however, how effective it is at reducing
poverty and so far there is limited evidence.
"CDC is government-owned, but its obligations to report to the
Department for International Development have been weak. Oversight by
the department of how CDC operated agreed remuneration arrangements was
ineffective.
Story from BBC NEWS:
http://news.
Published: 2009/04/30 00:42:47 GMT
Thursday, 30 April 2009
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