Bid to curb pay of bosses on 140 times as much as staff
BOSSES who receive exorbitant pay packets need to face a ‘ hostile environment’ of regulation and staff scrutiny, MPs demand today.
The ‘eye-watering’ pay packets handed out to chief executives of the UK’s biggest companies have risen four times as fast as average earnings in the last ten years.
Chief executives are now paid an average of £4million – 140 times more than their workforce, a report from MPs reveals today.
It points to a ‘roll- call of dishonourable executive pay decisions’, including BT, Royal Mail and housebuilder Persimmon, saying the ‘all-too familiar tale of corporate greed’ undermines trust in business.
Persimmon boss Jeff Fairburn was paid £75million after his company’s profits grew as a result of the taxpayer-funded Help to Buy scheme.
‘Over-generous’ salaries and ‘executive greed has been baked into the system’, the report says, adding that Britain’s bosses are now the second-best paid in Europe behind Switzerland.
In the report, published by the Commons business, energy and industrial strategy (BEIS) committee, the MPs lay out radical measures for companies that choose to pay unjustifiable wages. They call for a new regulator to be brought in with the powers to cap pay and order bosses to hand back money awarded without justification.
Ordinary workers should be placed on remuneration committees, the report adds, and bosses’ pay should not boosted by ‘unpredictable and excessive’ bonuses.
BEIS committee chairman Rachel Reeves warns: ‘Eye-watering and unjustified CEO pay packages are corrosive of trust in business and threaten to undermine the public’s support for the way our economy operates.
‘The roll- call of dishonourable executive pay decisions at firms including Persimmon, Unilever, Royal Mail, BT, Melrose and Foxtons, tell the all-too-familiar tale of corporate greed.
‘Companies should be assured that the BEIS committee will continue to shine a light on executive pay.’
The report calls for businesses to move executive pay structures away from bonuses and towards simpler formulas based on fixed salaries and deferred share schemes.
MPs recommend businesses use profit-sharing schemes so workers
‘The growing gulf’
benefit from success, as well as appointing at least one employee representative to the committee that signs off executive pay.
Companies should also be forced to publish an ‘absolute cap’ on pay packets for executives.
The report says the Financial Reporting Council, which regulates auditors and oversees executive pay, is ‘underpowered and passive’.
Campaigners and business groups backed the report. Luke Hildyard, of the High Pay Centre, a think-tank, said: ‘Excessive executive pay is a key driver of the painful economic divides that exist in the UK.’
Charles Cotton, of the Chartered Institute of Personnel and Development, the professional body for human resources industry, said: ‘The growing gulf between pay for top earners and the rest of the workforce calls into question both the fairness and overall perform- ance of our workplaces.’ Dr Roger Barker, of the Institute of Directors, said: ‘There is no doubt that the executive pay policies of some large listed companies have eroded public trust in corporate governance.’