Business Secretary Greg Clark (pictured) is due to announce next week that nearly 1,000 listed firms will have to publish the ratio in a crackdown on excessive boardroom salaries
Leading companies will be forced to disclose how much their chief executive is paid compared to their average worker… and justify the sum.
Business Secretary Greg Clark is due to announce next week that nearly 1,000 listed firms will have to publish the ratio in a crackdown on excessive boardroom salaries.
It is also believed that a new public register will name and shame those whose investors revolt over the pay of bosses.
Sky News said the plans would be announced next week as ministers seek to rebut criticism that they have watered down the tough approach promised by Theresa May.
Last year the Prime Minister unveiled radical proposals, such as workers being granted representation on boards, but she has since backed away from these ideas.
The plans follow criticism over the high pay of executives following scandals such as the collapse of BHS. Mr Clark will announce that the Investment Association, the fund managers’ trade body, will oversee the creation of the new register to include any company which faces opposition from at least 20 per cent of shareholders.
Ministers say the publication of ratios between bosses and UK-based workers will shine a spotlight on boardroom pay. It was unclear if the figure for chief executives would be their total package, which averaged £4.5million last year in the FTSE-100, or only their much lower base salary.
Mr Clark is also expected to say that the Government will guarantee workers at listed companies a louder voice in the boardroom by amending the Corporate Governance Code. This will be achieved, an insider told Sky News, by designating a non-executive director to represent workers, nominating a director from the workforce or a new advisory council which would have access to board members.
That would meet a commitment made in the 2017 Conservative manifesto although the Government is abandoning a general election pledge to ‘legislate to make executive pay packages subject to strict annual votes by shareholders’.
The plans follow criticism over the high pay of executives following scandals such as the collapse of BHS
Companies will also have to produce an annual statement explaining how they acknowledge the interests of workers and wider stakeholders. In addition to the rules to be imposed on big public companies, privately owned businesses, including Sir Philip Green’s Arcadia Group, will become subject to a new voluntary code of corporate governance principles supervised by the Financial Reporting Council.
The proposals will be hailed by ministers as a robust package of reforms designed to make big business more accountable. They come after corporate governance failings at Sports Direct International and a bitter revolt over a £14million deal for BP chief executive Bob Dudley spurred the Government to pledge a crackdown on boardroom excess.
The collapse of high street chain BHS after being sold for £1 by Sir Philip was also a factor in hardening public and political opinion against the bosses of big businesses.
This year, there were fewer major protests over the pay of executives at FTSE-100 companies but there was a significantly higher number of revolts over bosses in the FTSE-250 index.
Under Sir Vince Cable, the former Business Secretary and now Liberal Democrat leader, shareholders in public companies were handed a binding say every three years on remuneration policy.
But the annual vote on what directors receive is on a non-binding basis and looks likely to continue that way.
The Department for Business declined to comment last night.