As part of a suite of corporate governance reforms aimed at reining in excessive executive pay packages and giving employees a greater voice in corporate decision making, this week the UK government is expected to propose establishing a new public register that would list all companies where investors have opposed directors’ compensation plans, Sky News reports:
Sky News has learnt that Business Secretary Greg Clark will announce that the Investment Association – the fund managers’ trade body – is to oversee the creation of the new register, which will include any company which faces opposition from at least 20% of shareholders.
New laws will also pave the way for nearly 1,000 listed companies to publish and justify the ratio between the pay of their chief executive and their average UK-based worker, according to a Whitehall source briefed on the plans. It was unclear whether the figure for chief executives would comprise their total remuneration – which in the FTSE-100 averaged £4.5m last year – or only their base salary, which would produce a much lower ratio.
The government’s assertive approach to “naming and shaming” organizations that allegedly overpay their executives follows from the populist position Prime Minister Theresa May has staked out since taking up residence at 10 Downing Street last year, in the aftermath of the Brexit referendum.
As part of that platform last year, May proposed a scheme to force companies to add employee representatives to their boards, which she later walked back from a hard mandate to a pledge to encourage businesses to find their own way to give employees a voice in governance. May campaigned in part on that promise in the snap elections she had called for June, in which her Conservative Party ended up losing its majority in Parliament, casting doubt on May’s ability to follow through on her policy agenda.
Now, according to Sky News, the plan for some kind of employee representation mandate is apparently back on. Clark is set to announce next week that the government will amend the Corporate Governance Code to require companies to either designate a non-executive director to represent workers on the board, appoint a director from the workforce, or establish an employee advisory council that has the board’s ear.