New laws to rein in boardroom pay announced

Listed companies will be forced to to publish and justify pay ratios between bosses and workers as part of the Government’s plan to enforce greater corporate responsibility.

Business Secretary Greg Clark today set out how a package of corporate governance reforms aims to enhance the transparency of big business to shareholders, employees and the public.

These will include the world’s first public register of listed companies where a fifth of investors have objected to executive annual pay packages. This new scheme will be set up in the autumn and overseen by the Investment Association, a trade body that represents UK investment managers.

In the coming months the government will introduce new laws to require around 900 listed companies to annually publish and justify the pay ratio between CEOs and their average UK worker, all companies of a significant size to publicly explain how their directors take employees’ and shareholders’ interests into account, and all large companies to make their responsible business arrangements public.
Last year, Prime Minister Theresa May said the behaviour of a small number of companies had “damaged the public’s trust in big business” and set out proposals to improve transparency and accountability and give employees a “voice in the boardroom”.

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.”

Paul Drechsler, Confederation of British Industry president, said: “Good corporate governance is an essential ingredient of business performance and the bedrock of trust between business and society.

“We know that how companies act and behave determines the way people think about business.

“Companies take this seriously and we look forward to working closely with the Government to ensure the UK maintains its reputation as a global leader in this field and as a primary location for international investment.”
Stefan Stern, director of the High Pay Centre think-tank, added: “We want investors and boards to ‎have a more constructive and more thoughtful conversation on executive pay, and this sort of public disclosure should help.

“This is a step in the right direction, providing greater transparency and focusing the public’s attention on those companies who ignore the concerns of their shareholders.”