As listed companies are given 12 months to reveal their pay gaps, large private companies may also find themselves under the same obligation
The government has today announced that under new corporate governance laws, which are due to come into effect by June 2018, 900 publicly listed companies will be under a duty to reveal the pay ratio between their highest earners and other employees. Along with the requirement for companies to ensure that workers are better represented at board level, companies will also need to explain publicly how their directors take employees’ and shareholders’ interests into account in measures aimed at increasing boardroom transparency in listed companies. It is not currently clear what form this reporting will need to take, with further consultation on amendments to the Corporate Governance Code and work on the proposals to follow this autumn.
However, whilst the new laws will only apply to publicly listed businesses, in a government document published today the government has stated that it would seek the Financial Reporting Council’s assistance in developing a set of similar corporate governance voluntary arrangements for large private companies. Reports are suggesting that the code will apply to all UK-headquartered companies with more than 1,000 employees.
Given the pressure from the opposition and the Trade Union Congress which have accused the government of watering down its plans to tackle corporate excess and referred to the reforms as “feeble”, this additional voluntary reporting obligation may well be another way in which Theresa May and Business Secretary Greg Clark are seeking to regain some ground by ensuring that yet more businesses are obliged to report.