The Home Secretary (and Prime Minister in waiting) Theresa May yesterday announced support for a range of measures to curb executive pay and build fairer pay structures within companies. In an article written for The Times, she promised to ensure that workers are represented on company boards and that shareholders get a binding vote on corporate pay. She also called for the disclosure of 'pay multiples' to show how much more bosses earn than the average shop floor worker.
This is a welcome intervention, and given May will be in place at Number 10 tomorrow, we look forward to seeing quick and decisive action to take these policies forward.
The Equality Trust has long supported the move for workers to be represented on company Boards, and we have campaigned too on the introduction of pay ratio reporting. An organisation already doing fantastic work in this area is Pay Compare, a not-for-profit company that encourages organisations to voluntarily provide their pay ratios. Pay Compare has already signed up numerous companies, and we believe this is a hugely important step to building trust in those organisations with responsible and equitable pay structures. However, we also believe we must go further, with Government support for compulsory pay ratio disclosure. To this end, we will shortly be announcing a campaign to introduce a new Pay Ratios Bill in Parliament.
It's not just the usual suspects who are supportive of many of Mrs May's proposals either. Support has also been forthcoming from important sections of the business community, with the Institute of Directors welcoming in particular plans to give shareholders more control over executive pay, and the presence of workers on boards. As the IoD noted, they are "unapologetically and unstintingly pro-business" but as such they recognise the importance of tackling poor governance.
The extremely high pay ratios we now see are both unjustifiable to large numbers of the public, and often a woefully inaccurate measure of the financial value added by executives. Businesses rely on the trust of consumers. Those companies that see executive pay rocket while the pay of their average worker stagnates will struggle to square that with discerning customers, who correctly question why some organisations see executives as talent to be nurtured, and other staff as a cost to be reduced.
As the sometimes painful divisions in this country identified by the EU referendum have shown, we desperately need an economy that benefits the many and not the few. An economy that provides decent jobs and decent pay, and that limits the sometimes absurd excesses of executive pay. Mrs May called for "...a vision of a country that works not for the privileged few, but that works for every one of us." It is extremely positive to hear the Government recognise this. Now we need to see action.
John Hood, Acting Director, the Equality Trust