U.K. Prime Minister Accused of Backing Down on Corporate Pay ReformBy
Listed companies will have to publish CEO-worker pay ratios
Union leader says measures will allow ‘business as usual’
Theresa May was accused of giving way to corporate interests after her long-promised plan to improve boardroom behavior was published without some of its toughest measures.
Listed firms will have to publish the ratio between the pay of chief executives and average workers, and companies where a fifth of shareholders have voted against compensation packages will be listed on a public register. But the representation of workers on boards -- something the prime minister pledged in a speech a year ago -- could mean simply a non-executive assigned to speak for staff.
“This is a far cry from Theresa May’s promise to crack down on corporate excess,” Frances O’Grady, general secretary of the Trades Union Congress, said in an e-mailed statement. “It’s a feeble proposal, spelling business as usual for boardrooms across Britain.”
May came to office as arguably the most skeptical prime minister about corporate behavior since the 1970s. She attacked corporate tax evasion, and said that bosses were paying themselves too much even as their companies under-performed. But the need to maintain business confidence during Brexit negotiations meant that even before her general election humiliation in June, she was watering down her rhetoric.
Since that election saw her unexpectedly lose her majority, she’s begun actively consulting business, setting up a round-table group to discuss Britain’s departure from the European Union.
Tuesday’s proposed new corporate governance rules, likely to take effect from 2019, didn’t mention May’s previous promise to make bonus payments more transparent. Instead, there is a requirement for companies to “justify” the ratio in pay between bosses and staff. On employee representation on boards, the government said companies can meet the objective by assigning a non-executive director to represent employees or setting up an employee advisory council.
Business Secretary Greg Clark argued that the proposals reflected the importance of keeping companies investing in the U.K. “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,” he said in a statement. “Today’s reforms will build on our strong reputation and ensure our largest companies are more transparent and accountable to their employees and shareholders.”
One of his predecessors as business secretary, Vince Cable, now leader of the opposition Liberal Democrats, was dismissive. “The register of executive pay doesn’t take us much further forward as this information is already publicly available via a quick internet search,” he said. “There is no mention of making shareholder votes on executive pay more regular, as the Conservatives promised.”
The government said it will also go ahead with a review of how share buyback programs are operated, to ensure they’re not used to artificially meet executive performance targets.