New laws to bring greater transparency to the boardroom do not go far enough, critics have said.
Business Secretary Greg Clark is to make all listed companies reveal the pay ratio between bosses and workers and justify the difference – as exclusively revealed by Sky’s City Editor Mark Kleinman last week.
The announcement comes after Prime Minister Theresa May branded fat cat bosses the “unacceptable face of capitalism”.
Mr Clark says the reforms will “ensure our largest companies are more transparent and accountable to their employees and shareholders”.
The proposals include giving employees a voice in the boardroom.
Image: Business Secretary Greg Clark will outline the measures later
In addition, listed companies where a significant number of shareholders are opposed to the executive pay packages would also have their names on a public register.
But critics have branded the measures a missed opportunity, with one union slamming the proposals on employee representation as “feeble”.
Under the plans, workers could be represented by a non-executive director rather than have a seat on the board in their own right.
Mrs May had promised during her Conservative leadership campaign that “we’re going to have not just consumers represented on boards, but workers as well”.
Labour’s shadow business secretary Rebecca Long-Bailey said the proposals were “just more crony capitalism from the Tories, who once again prop up the rigged system for the few at the expense of the many”.
Image: The PM has branded fat cat bosses the ‘unacceptable face of capitalism’
Liberal Democrat leader and former business secretary Sir Vince Cable said the approach was “strong on rhetoric, weak on action”.
He said that the new corporate governance code for large private companies was “voluntary and, therefore, likely to have little effect”.
TUC general secretary Frances O’Grady described the proposal as “feeble”, saying it was “spelling business as usual for boardrooms across Britain”.
She added: “The Prime Minister’s pledge to put workers on company boards has been watered down beyond all recognition.”
Unite’s Len McCluskey said the measures showed the Conservatives have been brought to heel by big business.
Downing Street rejected such criticism, saying the PM had been “pretty consistent” in her approach to workers’ representation on boards.
Image: Labour’s Rebecca Long-Bailey said the proposals were ‘just more crony capitalism’
“She wants to improve workers’ representation and that’s going to be achieved with part of this report, which is about changes to the corporate governance code,” a spokeswoman said.
“From her perspective, her position has been consistent and has not changed.”
Big business has mostly welcomed the plans.
CBI president Paul Drechsler said pay ratios “could prove a useful addition to the debate about executive pay”.
He added: “Providing shareholders with a ‘say on pay’ has been an effective tool and a public register will help to shine a light on the small minority of cases that warrant greater attention.”
Director general of the Institute of Directors Stephen Martin added: “Pay ratios will sharpen the awareness of boards on the issue of remuneration, but they can be a crude measure.
“Companies will have to prepare themselves to explain how pay as a whole in their business operates, and why executives are worth their packages.”