New Select Committee report on executive pay
Business, Energy and Industrial Strategy Committee calls for worker involvement in executive pay-setting process and says executive share award schemes should be open to the entire workforce
The influential Business, Energy and Industrial Strategy Select Committee has published a new report on executive pay.
High Pay Centre Director Luke Hildyard gave evidence to the committee's inquiry last Autumn. The report makes a powerful argument for controlling executive pay in order to improve corporate governance, tackle the gap between the super rich and low and middle earners and address the damage that unjustifiable top pay increases are doing to the reputation of business.
HPC very much welcomes this rigorous report - excessive executive pay is a key driver of the painful economic divides that exist within the UK. When the typical FTSE 100 CEO earns the average UK worker's annual salary in under 3 days, it shows that too many business leaders have lost their sense of fairness or proportionality
In particular, the Select Committee's recommendations that pay reporting requirements should be extended to all larger companies and that elected workers' representatives should be given seats on the remuneration committees that set executive pay would make a big difference to the pay setting process. Opening up profit sharing or share award schemes to all workers, rather than just top managers, is also vital to rebuilding public trust in business. Success is a collective achievement and everyone who plays their part deserves to be rewarded.
In addition to the corporate governance reforms identified by this report, it's important to acknowledge the role of an empowered workforce and active trade unions in tackling the gap between the super rich and everybody else. Making it easier for unions to organise, particularly in low-paid, precarious industries, would help workers to negotiate a fairer distribution between highly-paid executives and low and middle income earners.
As leading UK companies announce their executive pay packages in annual reports ot be published over the coming weeks, and then put them to shareholder votes at their AGMs, HPC will be monitoring closely to see whether the Select Committee's message is being adhered to or ignored.
Since 1 January 2020 the average FTSE 100 CEO has earned:
Income inequality in the UK
Wealth inequality in the UK
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