Pay Ratios - Corporate Governance Rules Outlined

15 September 2017 | Updated 01 January 1970

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 at the end of August.

Business Secretary Greg Clark 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 has committed to 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.

Greg Clark said: "One of Britain’s biggest assets in competing in the global economy is our reputation for being a dependable and confident place in which to do business. Our legal system, our framework of company law and our standards of corporate governance have long been admired around the world. These reforms will ensure our largest companies are more transparent and accountable to their employees and shareholders."

The Business Secretary will ask that the UK Corporate Governance Code, includes a requirement to provide one of the following:

A non-executive director to represent employees.
An employee advisory council.
Nominate a director from the workforce.

Stephen Haddrill, CEO of the FRC, said: "The FRC is undertaking a fundamental review of the Corporate Governance Code. The government’s feedback will help inform the development our consultation later this year."

The government intends to bring legislative reforms into effect by June 2018.

Picture: Business Secretary, Greg Clark

Article written by Cathryn Ellis | Published 15 September 2017