The heat is turned up on executive pay as Greg Clark unveils corporate governance green paper
Executive pay has come under scrutiny again today. On Radio 4’s Today Programme this morning the business secretary Greg Clark referred to the steep rise in executive pay by comparison to the average pay of remaining staff and the fact that executive pay tends to outpace the performance of underlying shares. He proposed giving shareholders greater powers to hold executives to account, beyond the advisory vote afforded to them currently, and publishing pay ratios showing the difference between a CEO’s pay and the rest of the workforce.
This forms the basis of the government’s green paper (a government consultation document) published today, intended to reform the way business is run in the UK. The paper will ask, amongst other things, whether shareholders should get a binding vote on executive pay (including pay structure), whether private companies should be subject to some of the same corporate governance rules as public companies and how employees voices could be heard in the boardroom. Note that Theresa May has already ruled out direct election of workers or trade union representatives on boards.
The green paper comes in response to public outcry over executive pay and against a backdrop of high profile employee rights disasters over the past year, including the scandals at BHS and Sports Direct. The consultation is likely to result in increased regulation for all businesses and greater exposure for poor corporate governance.
A copy of the green paper can be found here.