Business Secretary says public 'frustrated' at bumper pay packets for bosses as new rules kick in
Ministers have acknowledged public "frustration" at soaring pay executive packets as new rules requiring firms to disclose the gap between bosses and average workers came into force.
Regulations that kick in today mean UK listed firms with more than 250 staff will have to explain how the pay of their most senior executives relates to the average pay of the wider workforce.
Firms will be required to publish the ratio of their CEO’s pay to the median, lower quartile and upper quartile pay of their UK employees every year.
Business Secretary Greg Clark said most companies acted “responsibly” and used “good business practices”.
But the Cabinet minister added: “We do however understand the frustration of workers and shareholders when executive pay is out of step with performance and their concerns are not heard.
“The regulations coming into force today will build on our reputation by increasing transparency and boosting accountability at the highest level - giving workers a stronger dialogue and voice in the boardroom and ensuring businesses are accountable for their executive pay.”
Large companies will have to start logging the information from today with the first disclosures - covering this year - due in 2020. They will also be required to report on how their directors take employee interests into account when handing out bonuses and deciding salaries.
But Labour has dismissed the new law - which comes after years of shareholder rebellions over bumper payouts for chief executives at firms including BP and housebuilder Persimmon - as a "weak Tory fudge".
Shadow Business Secretary Rebecca Long-Bailey said executive pay was "running out of control".
"While the Conservatives’ watered-down regulations will only require large companies to publish pay bands, Labour in government will take decisive action on excessive pay.
"Labour is committed to rolling out maximum pay ratios of 20:1 in the public sector and in companies bidding for public contracts, because it cannot be right that wages at the top keep rising while everyone else’s stagnates."
She added: "Labour will also legislate to reduce pay inequality by introducing an Excessive Pay Levy on companies with staff on very high pay. Positive action from Labour in comparison to a weak Tory fudge."
Executive pay was thrust into the spotlight again last year when Persimmon chief executive Jeff Fairburn was forced to step down following an outcry over a £100m bonus that the company admitted had had "a negative impact on the reputation of the business".