Trade unions join criticism as government unveils watered-down corporate shake-up
Businesses will be forced to reveal the pay ratio between chief executives and average workers for the first time, the Government has confirmed.
But the long-awaited package of corporate governance reform has been dismissed by opposition parties and trade unions after previous plans to give workers a seat on boards were ditched.
Other measures in the Conservative manifesto, like an annual binding shareholder vote on executive pay, have also been dropped.
Instead, listed companies will be required to publish and justify the difference between their top earners and average salaries, a new public register will be set up to highlight firms that have faced a significant shareholder revolt on executive remuneration packages, and businesses will have to comply with one of a range of options to give employees a greater voice in the boardroom.
Business Secretary Greg Clark said: “One of Britain’s biggest assets in competing in the global economy is our deserved 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.
“We have maintained such a reputation by keeping our corporate governance framework under review.
“Today’s reforms will build on our strong reputation and ensure our largest companies are more transparent and accountable to their employees and shareholders.”
He also revealed that the Financial Reporting Council would be asked to come forward with a voluntary code of corporate governance for large private companies.
‘THE TORY PLAN IS A FRAUD’
But opposition parties and trade unions hit out at Theresa May for ditching some of her previous more radical ideas.
Rather than giving employees a direct seat on boards, firms would either have to assign a non-executive director to represent workers, set up an advisory council for the workforce, or nominate a director from the workforce.
Shadow Business Secretary Rebecca Long-Bailey described it as “just more crony capitalism from the Tories, who once again prop up the rigged system for the few at the expense of the many”.
“The Tory plan is a fraud, watering down an original promise to increase workers' voice to a lone representative on the board of directors or a separate employee advisory council. Each of these will be easily outvoted or ignored,” the Labour MP added.
“The Tories seem to believe fixing Britain's broken system of corporate governance, which not only leads to scandals like BHS, extreme executive pay, but also growing inequality and stagnating wages, is just a matter of changing one or two nameplates around the boardroom table.”
TUC general secretary Frances O’Grady said: “The Prime Minister's pledge to put workers on company boards has been watered down beyond all recognition. This now amounts to little more than a box-ticking exercise.”
Unite general secretary Len McCluskey described the proposals as “insulting”.
“Today's announcement only confirms that the Tory government is washing its hands of its responsibilities to change the broken corporate culture in this country,” he said.
“Once again the big business lobby has brought the Tory party to heel.”