Larger companies to report on corporate pay ratios

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The Government has laid out new legislation requiring larger companies to report and justify the pay difference between top executives’ pay and average pay in their organisation.

Companies with over 250 employees will also have to publish a narrative explaining any changes to the pay ratio on a year by year basis and set their report in context.

They will also have to show how their directors take employee and other stakeholder interests into account, show the impacts of an increase in share prices on executive pay and report on “responsible business arrangements”.

Business Secretary Greg Clark said: “Most of the UK’s largest companies get their business practices right, but we understand the anger of workers and shareholders when bosses’ pay is out of step with company performance.

“Requiring large companies to publish their pay gaps will build on that reputation by improving transparency and boosting accountability at the highest levels, while helping build a fairer economy that works for everyone.”

The gap between women and men’s earnings reported in the gender pay audits is generally linked to a lack of women in the most senior positions.

TUC General Secretary Frances O’Grady said: “Publishing and justifying pay ratios is a first step, but more is needed. Fat cat bosses are masters of self-justification and shrugging off public outcry. New rules are needed to make sure they change.

“We need guaranteed places for worker representatives on boardroom pay committees. That would bring a bit of common sense and fairness to decision-making when boardroom pay packets are approved.

“And the government should put an end to phoney incentive schemes that reward executives above and beyond the actual results they get.”

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