Big firms will be forced to justify pay gap between boss and workers under new Government plans
2 min read
Major companies will have to justify the pay gap between their chief executives and their average member of staff under new Government rules.
By 2020, UK-listed firms with more than 250 employees would have to reveal their “pay ratios” and justify their CEO's salary, if the proposals are confirmed.
The announcement comes amid concern in recent years about excessive pay at the top level.
The new regulations, which need parliamentary approval, also require listed companies to show what effect an increase in share price will have on executive pay.
The move comes as part of the Government’s “Industrial Strategy” and ministers believe it will hold large firms to account, while “giving employees a greater voice in the boardroom”.
Business Secretary Greg Clark said: “Most of the UK's largest companies get their business practices right but we understand the anger of workers and shareholders when bosses' pay is out of step with company performance.
"Requiring large companies to publish their pay gaps will build on that reputation by improving transparency and boosting accountability at the highest levels, while helping build a fairer economy that works for everyone."
But Labour lashed out at the plans, with Shadow Business Secretary Rebecca Long Bailey branding them "half-baked, rehashed policies that do nothing to tackle the entrenched inequality that's crippling our society".
“This won't end staggering pay disparity or help hard-up workers at the bottom of the chain. Theresa May and her Government are too weak and unwilling to take on big bosses and act in favour of ordinary workers," she said.
“Labour will stand up to the corporate elite by making businesses act in the best interest of their employees and roll out maximum pay ratios in public sector companies and contracts.”
Chief UK Policy Director of the Confederation of British Industry (CBI) Matthew Fell said: "High pay for mediocre or poor performance is unacceptable.
"This legislation can help to develop a better dialogue between boards and employees about the goals and aspirations of their business, and how pay is determined to achieve this shared vision.
"Ratio comparisons between sectors and firms will be as meaningless as comparing apples and oranges. What’s most important is that all businesses make progress towards fair and proportionate pay outcomes."
TUC general secretary Frances O'Grady said the move was "a first step, but more is needed".
“Fat-cat bosses are masters of self-justification and shrugging off public outcry. New rules are needed to make sure they change,” she said.
“We need guaranteed places for worker representatives on boardroom pay committees.
“That would bring a bit of common sense and fairness to decision-making when boardroom pay packets are approved.”
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