New rules on corporate pay to give employees ‘a voice in the boardroom’
NEW laws aimed at bringing greater pay transparency to the boardroom are being unveiled by the Government today.
The move comes after Prime Minister Theresa May branded fat-cat bosses the “unacceptable face of capitalism”.
Measures being outlined by Business Secretary Greg Clark will make all listed companies reveal the pay ratio between bosses and workers and justify the difference.
Firms with significant shareholder opposition to executive pay packages will also have their names included on a public register under the reforms.
Employees will also be given a voice in the boardroom, Mr Clark said. However, opposition parties branded the measures a missed opportunity.
Mr Clark said: “One of Britain’s biggest assets in competing in the global economy is our deserved reputation for being a dependable and confident place in which to do business.
“Our legal system, our framework of company law and our standards of corporate governance have long been admired around the world.
“We have maintained such a reputation by keeping our corporate governance framework under review.
“Today’s reforms will build on our strong reputation and ensure our largest companies are more transparent and accountable to their employees and shareholders.”
Moves to boost the representation of employees’ interests at board level will be overseen by the Financial Reporting Council (FRC).
The FRC is to amend its UK Corporate Governance Code so firms either assign a non-executive director to represent employees, create an employee advisory council, or nominate a director from the workforce.
CBI president Paul Drechsler said: “The CBI is very clear that the unacceptable behaviour of a few firms does not reflect the high standards and responsible behaviour of the vast majority of companies.
“If pay ratios include meaningful context they could prove a useful addition to the debate about executive pay. Providing shareholders with a ‘say on pay’ has been an effective tool and a public register will help to shine a light on the small minority of cases that warrant greater attention.”
Chris Cummings, chief executive of the Investment Association, said: “Our members, who manage the pensions of 75% of UK households and own over one third of the FTSE, believe that not all company boards that receive big shareholder dissent are currently doing enough to address investor concerns.
“This public register will help sharpen the focus on the those who must do more, ena- bling our members to hold the country’s biggest businesses to account and leading to better-run companies. We look forward to working with Government to deliver the public register and aim to launch it later this autumn.”
Stephen Martin, director general of the Institute of Directors, added: “Pay ratios will sharpen the awareness of boards on the issue of remuneration, but they can be a crude measure.
“Companies will have to prepare themselves to explain how pay as a whole in their business operates, and why executives are worth their packages.”
Prime Minister Theresa May on a visit to bus and coach manufacturer Alexander Dennis last week