U.K. to Force Listed Firms Disclose Pay Ratios Between CEOs & Workers in Corporate Governance Code Reform

The U.K. government is set to release further details of its corporate governance reforms Tuesday and expected to force listed companies to publish and justify pay ratios between top executives and their staff members, according to media reports.

Following intense lobbying, the government is, however, expected to drop Prime Minister Theresa May’s plan to force firms to put employee representatives on boards, the media reports noted. Instead, companies will be required to appoint a non-executive director to represent employees or create an employee advisory council.

Back in January, the Financial Reporting Council had said in a report an analysis of the 2016 season of annual general meetings held by U.K. companies showed “generally reduced” investor support for remuneration resolutions, with concern noted about a “lack of transparency about the link between executive pay and performance”.

“Providing shareholders with a ‘say on pay’ has been an effective tool and a public register will help to shine a light on the small minority of cases that warrant greater attention,” Paul Drechsler CBE, president of the Confederation of British Industries (CBI), said in a statement Tuesday. “If pay ratios include meaningful context they could prove a useful addition to the debate about executive pay.”

Meanwhile, Frances O’Grady, the general secretary of TUC, a trade union, condemned the corporate reforms as “feeble,” noting the prime minister’s pledge to place workers on boards had been watered down beyond all recognition, the reports added. He was cited as saying the move now amounted to little more than “box-ticking exercise”.

The new proposals are expected to come into force by June.

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