Theresa May attacks ‘unacceptable face of capitalism’
Businesses who pay excessive salaries to senior executives represent the “unacceptable face of capitalism”, Prime Minister Theresa May has said.
The “excesses” of some bosses was undermining confidence and “damaging the social fabric of our country”, she wrote in the Mail on Sunday.
Firms that face shareholder revolts over salaries and bonuses will be named on a new public register, Mrs May said.
She also said firms could decide how workers are represented in boardrooms.
The Conservatives’ manifesto said executive pay should be approved by an annual vote of shareholders.
Mrs May’s article does not mention this commitment, but instead says firms that have a “shareholder revolt” on pay will be named on a new public register.
The Mail on Sunday suggests a “revolt” will be defined as 20% of shareholders.
Stefan Stern, director of independent think tank, the High Pay Centre, told the BBC: “These shareholder votes are already in the public domain, and reported by the media.
“But the symbolism of being named on a list is something that will get the attention of company boards.
“They won’t want to be on this list, for as well as the adverse attention it brings, it could also make them potentially vulnerable to hostile investors.”
He said that Mrs May’s proposals were “a step in the right direction”, but that more needed to be done to address the systemic issue of high executive pay.
Mrs May said new measures – to be announced this week – would also ensure workers’ voices were “properly heard in the boardroom”.
She said the government will set an “expectation” that publicly-listed companies have in place an employee advisory panel, or an employee representative on their boards.
Mrs May said most of the UK’s biggest businesses invested in their workforces and looked after the interests of employees and investors.
However, she said that “too often in recent years we have also seen another, unacceptable, face of capitalism”.
A “minority of firms are falling short of the high standards we expect of them,” she added.
“Some have deliberately broken rules that are designed to protect their workers.
“Others have ignored the concerns of their shareholders by awarding pay rises to bosses that far outstrip the company’s performance.”
Earlier this year the £48m pay package of Sir Martin Sorrell, chief executive of advertising giant WPP, was rejected by one in five shareholders at the firm.
It was the seventh year in a row that more than a fifth of shareholders voted against Sir Martin’s pay.
In a non-binding vote last year, BP shareholders rejected a pay package of almost £14m for chief executive Bob Dudley.
This month, a report revealed the pay of top chief executives’ had fallen in the past year.
However, the High Pay Centre’s research said there was still “a huge gap” between the pay of the bosses of FTSE 100 companies and the rest of their staff.