Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
    • OHW Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+

Personnel Today

Register
Log in
Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
    • OHW Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+

Corporate governanceExecutive pay

Companies may have to reveal CEO pay gap

by Jo Faragher 29 Nov 2016
by Jo Faragher 29 Nov 2016 Business secretary Greg Clark unveiled the proposed measures
Mark Thomas/REX/Shutterstock
Business secretary Greg Clark unveiled the proposed measures
Mark Thomas/REX/Shutterstock

The Government has launched a consultation on measures that could force companies to reveal the gap in earnings between their CEO and the average employee.

Business secretary Greg Clark outlined the options in a Green Paper published on 29 November 2016.

Publicising the ratio of CEO pay to pay in the wider company workforce would allow shareholders, employees and the public to compare executive pay across different companies and require businesses to justify the level of executive pay within a company.

However, the Green Paper raised concerns about the utility of pay ratios and the potential for public misinterpretation of published figures.

Corporate governance resources

Regulatory compliance

How to conduct a pay review

How to run a performance-related pay scheme

Prime Minister Theresa May hopes the new corporate governance measures will “ensure that everybody plays by the same rules” after previously hitting out at executives who “game the system” – such as BHS chairman Sir Philip Green, who has faced criticism for allowing the retailer to put thousands of employees’ pensions at risk.

The proposals formed part of a wider consultation on corporate governance, which aims to increase public trust in business.

As well as potentially requiring companies to divulge pay ratios, the Green Paper consults on proposals for shareholders to be handed more powers to vote against bosses’ pay, and to ensure that the “voice” of employees and customers is better represented on company boards. The consultation closes on 17 February 2017.

The Prime Minister recently backtracked on a pledge to mandate worker representation on boards, saying there were “other routes” within existing board structures to give workers a voice.

Clark told the BBC’s Today programme earlier today that CEOs should be “paid in line with performance”, given that growth in executive pay has “substantially outpaced the performance of underlying shares” in publicly listed companies.

Charles Cotton, pay and reward adviser at the CIPD, welcomed the Government’s proposals. He said: “The publication of pay ratios is a welcome first step in addressing the broken system of executive pay.

“Alongside the presence of employees on remuneration committees, they will help build greater transparency over executive salaries and bonuses, and should encourage organisations to ensure there is a clearer link between overall top pay levels, organisational performance and the rewards of the wider workforce.

“This is not about naming and shaming companies, but instead encouraging open conversations about what’s being rewarded and recognised at each grade, how, when and why.”

However, Mathew Lawrence, research fellow at the IPPR think tank, said the Government could have been bolder: “The aim of corporate governance reform should be to tackle the deep-rooted problems in the UK’s economic model: low levels of business investment and high levels of pay inequality.

“While welcome, these announcements don’t go far enough to address these fundamental challenges. The evidence shows there is little correlation between executive pay deals and business performance.

“Consulting workers on executive pay is a good first step but lacks bite; nor is it likely that transparency on pay ratios will be enough to rein in excessive remuneration packages.”

Ian McVey, UK director of employee insight company Qualtrics, said the plans to force greater executive transparency could boost productivity.

He said: “The Green Paper and Autumn Statement are directly linked because low productivity and dysfunctional employee engagement are two sides of the same coin.

“Giving employees a voice reduces turnover, boosts motivation and dramatically improves outcomes for companies and customers alike. In tough times, CEOs need to keep their employees close more than ever.”

The UK is not alone in targeting pay ratios, with US employers set to report them at the start of next year.

Jo Faragher
Jo Faragher

Jo Faragher has been an employment and business journalist for 20 years. She regularly contributes to Personnel Today and writes features for a number of national business and membership magazines. She won the Willis Towers Watson HR journalist of the year award in 2015 and has been highly commended twice.

previous post
HR analytics skills: strong demand but short supply
next post
The 10 most important employment law cases in 2016

Leave a Comment Cancel Reply

Save my name, email, and website in this browser for the next time I comment.

You may also like

Chief financial officers now more involved in HR

1 Jul 2022

Directors’ code of conduct needed to uphold standards,...

20 Jun 2022

CIPD Festival of Work: ‘Businesses will fail if...

16 Jun 2022

CIPD Festival of Work: ‘Use crises as catalysts...

15 Jun 2022

Trust seeks better language and employability support for...

13 Jun 2022

Corporate reporting and audit regime will reduce risk...

31 May 2022

Pay gap between CEOs and employees set to...

23 May 2022

Women in FTSE 350 leadership: ‘A lot of...

20 May 2022

Youth collective to inform Body Shop strategy

6 May 2022

Survey reveals public desire for CEO pay restraint

4 May 2022
  • NSPCC revamps its learning strategy with child wellbeing at its heart PROMOTED | The NSPCC’s mission is to prevent abuse and neglect...Read more
  • Diversity versus inclusion: Why the difference matters PROMOTED | It’s possible for an environment to be diverse, but not inclusive...Read more
  • Five steps for organisations across the globe to become more skills-driven PROMOTED | The shift in the world of work has been felt across the globe...Read more
  • The future of workforce development PROMOTED | Northumbria University and partners share insight...Read more

Personnel Today Jobs
 

Search Jobs

PERSONNEL TODAY

About us
Contact us
Browse all HR topics
Email newsletters
Content feeds
Cookies policy
Privacy policy
Terms and conditions

JOBS

Personnel Today Jobs
Post a job
Why advertise with us?

EVENTS & PRODUCTS

The Personnel Today Awards
The RAD Awards
Employee Benefits
Forum for Expatriate Management
OHW+
Whatmedia

ADVERTISING & PR

Advertising opportunities
Features list 2022

  • Facebook
  • Twitter
  • Instagram
  • Linkedin


© 2011 - 2022 DVV Media International Ltd

Personnel Today
  • Home
    • All PT content
    • Advertise
  • Email sign-up
  • Topics
    • HR Practice
    • Employee relations
    • Equality, diversity and inclusion
    • Learning & training
    • Pay & benefits
    • Wellbeing
    • Recruitment & retention
    • HR strategy
    • HR Tech
    • The HR profession
    • Global
    • All HR topics
  • Legal
    • Case law
    • Commentary
    • Flexible working
    • Legal timetable
    • Maternity & paternity
    • Shared parental leave
    • Redundancy
    • TUPE
    • Disciplinary and grievances
    • Employer’s guides
  • AWARDS
    • Personnel Today Awards
    • The RAD Awards
    • OHW Awards
  • Jobs
    • Find a job
    • Jobs by email
    • Careers advice
    • Post a job
  • XpertHR
    • Learn more
    • Products
    • Pricing
    • Free trial
    • Subscribe
    • XpertHR USA
  • Webinars
  • OHW+