UK firms told to justify pay gaps

> Amid concerns that some CEOs’ salaries are out of step with company performance

LONDON: Britain’s biggest companies will from 2020 be legally required to publish the gap between the salary of their CEO and what they pay their average UK worker, under proposed new government rules.

Business minister Greg Clark said the government would set out new laws in Parliament today which meant that UKlisted companies with more than 250 employees would have to reveal their pay gap and justify their CEO’s salary.

“We understand the anger of workers and shareholders when bosses’ pay is out of step with company performance,” he said in a statement yesterday.

Clark said the new laws would improve transparency and boost accountability for both shareholders and workers, as well as helping to “build a fairer economy”.

The new laws are part of the government’s “Industrial Strategy” and will come into effect from Jan 1, 2019, meaning firms will start reporting in 2020.

When these rules were first proposed last year, they were criticised by union leaders who said they fell short of Prime Minister Theresa May’s promise early on in her tenure to tackle soaring executive pay.

She came to power after the 2016 Brexit vote vowing to tackle what she called the “unacceptable face” of capitalism, including pay gaps and mismanaged takeovers, which had driven a wedge between British bosses and their workers.

Earlier this year, all UK companies with 250 or more employees had to publish details of the salary difference between male and female employees. They will report back annually on that pay gap.

Matthew Fell, chief UK policy director at British employers group, the Confederation of British Industry, said the new legislation would help develop a better dialogue between boards and employees.

“What’s most important is that all businesses make progress towards fair and proportionate pay outcomes,” he said. – Reuters