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Firms could be forced to reveal CEO and worker pay gap

By December 1, 2016Current Affairs
Pay Gap | HR Solutions

The government has announced proposals to make large UK companies reveal the pay gap between their top management and average workers.

In a move intended to stem the rise in anti-big business and anti-globalisation, the government are considering a number of measures as part of a consultation to curb the excesses of corporate pay.

These proposals include:

  • Companies publishing pay ratios showing the difference between executive and average worker earnings.
  • Introducing binding votes on executive pay packages.
  • Ensuring that remuneration committees consult shareholders and the wider company on pay issues.

In a recent speech, Prime Minister Theresa May appeared to back away from her earlier pledge to force companies to place worker representatives on boards. However, her drive to restore public trust in business seems undaunted.

123 x the average full-time salary

Theresa May has vowed to fight for the interests of those who are ‘just about managing’, known as the ‘Jams’.

But in September, the TUC discovered that the average FTSE 100 salary is 123 times higher than the average salary. It revealed that one CEO earns in less than 45 minutes what it takes the average worker to earn in a year.

In the last five years, the median pay award for FTSE 100 directors has risen by 47%.

As part of the consultation, civil servants have investigated measures adopted in other countries, from Australia to the USA.

Government proposals face criticism

A report by think tank, the Big Innovation Centre, rejects calls for greater pay transparency and binding votes on pay. The Big Innovation Centre is made up of company bosses, academics and leading consultancy firms. It argues that the UK’s top firms could lose out on top talent if binding votes were imposed. Their report also argues that publishing pay ratios would create further misunderstanding over executive pay.

While the government continues to review corporate governance, keeping company chiefs happy while restoring public faith in the corporate world could prove a tough challenge.

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