Listed firms will have to reveal CEO-to-employee pay ratios
31 August 2017
Business secretary Greg Clark has set out the government’s corporate governance reforms to enhance the public's trust in business.
For the first time listed companies will have to publish pay ratios between chief executives and their average UK worker under government reforms to boardroom accountability outlined by business secretary Greg Clark. He set out how the government’s package of corporate governance reforms will enhance the transparency of big business to shareholders, employees and the public.
These will include the world’s first public register of listed companies where a fifth of investors have objected to executive annual pay packages. This new scheme will be set up in the autumn and overseen by the Investment Association, a trade body that represents UK investment managers.
In the coming months the government will introduce new laws to require:
- Around 900 listed companies to annually publish and justify the pay ratio between CEOs and their average UK worker
- All companies of a significant size to publicly explain how their directors take employees’ and shareholders’ interests into account
- All large companies to make their responsible business arrangements public
The business secretary will seek to ensure employees’ interests are better represented at board level of listed companies. He will ask the Financial Reporting Council (FRC), which sets high standards of governance through the UK Corporate Governance Code, to introduce a new requirement in the code to achieve this.
Under the code’s ‘comply or explain’ basis, firms would have to either:
- Assign a non-executive director to represent employees
- Create an employee advisory council
- Nominate a director from the workforce
The FRC will also be asked to work with the business community and the government to develop a voluntary set of corporate governance principles for large private companies.
The government intends to bring legislative reforms into effect by June 2018.
Full details of the reforms can be found in the full press release.