Theresa May kicks off bid to slash top dog pay
The government will tomorrow launch its overhaul of executive pay as Prime Minister Theresa May looks to stamp her authority on City boardrooms despite warnings from business groups that she should not adopt an approach that is too hardline.
After U-turning on her campaign pledge to put workers on boards, May will press ahead with plans to bring salaries into line with corporate performance.
Downing Street will reveal the proposals in a green paper to be published tomorrow, just over a week after May told the CBI annual conference that businesses would not be required to install workers or trade union representatives in their boardrooms.
Read more: Firms back May's attack on executive pay
The government will consult on asking businesses to meet a range of measures including a requirement for large, public companies to publish pay ratios showing the difference between chief executive and median salaries, binding votes on executive pay packages and a broad need to improve the effectiveness of remuneration committees.
However, the Prime Minister’s zeal for intervention has left business voices wary of the government’s approach.
“Does [a pay ratio] really provide any useful information? Goldman Sachs might look better than Tesco under this kind of regime, but does it really tell you anything?” an Institute of Directors spokesman added.
“We have got to the point where this is probably going to come in, so companies are going to have to get ready for it.”
Read more: Executive pay regulation will backfire if it’s not based on evidence
British Chambers of Commerce director general Adam Marshall warned that a hardline approach would undermine collaboration between Downing Street and employers.
“It’s extremely important for government and business to work together at such a critical moment for this country and I wouldn’t want to see that in any way negatively affected,” Marshall said.
“The business department has been listening and has been looking at the various options and what we have been trying to impress on them is that we have a very strong corporate governance culture in this country, and we should see moves like this to improve that only where it is obviously needed and otherwise we should be working hand in hand.”
And Mark Littlewood, director general of free-market think tank the Institute of Economic Affairs, branded the plans “the politicisation of pay”.
“Our government should be discouraging interventions of this type if it wants to maintain this country’s reputation, post-Brexit, of being business-friendly,” he said.