Government Committee launch inquiry on executive pay

20 September 2016

The Business, Innovation, and Skills (BIS) Committee has launched an inquiry on corporate governance, focusing on executive pay, directors duties, and the composition of boardrooms, including worker representation and gender balance in executive positions.

The BIS Committee inquiry follows on from the corporate governance failings highlighted by the Committee’s recent inquiries into BHS and Sports Direct, and in the wake of commitments from the Prime Minister to overhaul corporate governance.

The inquiry questions are as follows:

Executive pay

  • What factors have influenced the steep rise in executive pay over the past 30 years relative to salaries of more junior employees?
  • How should executive pay take account of companies’ long-term performance?
  • Should executive pay reflect the value added by executives to companies relative to more junior employees? If so, how?
  • What evidence is there that executive pay is too high? How, if at all, should Government seek to influence or control executive pay?
  • Do recent high-profile shareholder actions demonstrate that the current framework for controlling executive pay is bedding in effectively? Should shareholders have a greater role?

Directors Duties

  • Is company law sufficiently clear on the roles of directors and non-executive directors, and are those duties the right ones? If not, how should it be amended?
  • Is the duty to promote the long-term success of the company clear and enforceable?
  • How are the interests of shareholders, current and former employees best balanced?
  • How best should the decisions of Boards be scrutinised and open to challenge?
  • Should there be greater alignment between the rules governing public and private companies? What would be the consequences of this?
  • Should additional duties be placed on companies to promote greater transparency, e.g. around the roles of advisors. If so, what should be published and why? What would the impact of this be on business behaviour and costs to business?
  • How effectively have the provisions of the 1992 Cadbury report been embedded? How best can shareholders have confidence that Executives are subject to independent challenge?
  • Should Government regulate or rely on guidance and professional bodies to ensure that Directors fulfil their duties effectively?

Composition of Boards

  • What evidence is there that more diverse company boards perform better?
  • How should greater diversity of board membership be achieved? What should diversity include, e.g. gender, ethnicity, age, sexuality, disability, experience, socio-economic background?
  • Should there be worker representation on boards and/or remuneration committees? If so, what form should this take?
  • What more should be done to increase the number of women in Executive positions on boards?

Written evidence should be submitted online via the Corporate Governance inquiry page by Wednesday 26 October 2016.

Terms of reference: Corporate Governance