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Business chiefs urge curbs on excessive executive pay

Business leaders are calling for measures to curb excessive executive pay amid warnings that "fiddling around the edges" is not enough to tackle the issue.

A number of groups have responded to a Government consultation, telling ministers there has never been a more important time to build public trust in business.

The CBI, which represents 190,000 businesses, said shareholders should be given more powers to have a final say on executive pay where it has "disconnected" from exceptional performance.

Its recommendations included information on the pay of executives and other employees.

CBI president Paul Drechsler said e xecutive pay has become a lightning rod for public discontent, adding: "The CBI is absolutely clear that the unacceptable behaviour of the few does not reflect the high standards and responsible behaviour of the vast majority of companies.

"Our proposals seek to address some of the issues that have undermined the reputation of business. Where chief executive pay has become disconnected from performance, shareholders should have the power to show the company a 'yellow card'.

"Firms that lose their advisory vote on pay or receive 25% or more vote against the directors' remuneration report for two consecutive years, should face a binding vote on policy at their next AGM.

"Any pay ratio publication should focus on the trends within a company's UK workforce - showing how the variance between executive pay and average worker pay is changing over time. This way, pay ratios may provide meaningful transparency and value to this debate."

A joint response from the Chartered Institute of Personnel and Development and the High Pay Centre calls for a "major rethink" of corporate governance.

Publicly listed firms should have at least one employee on remuneration committees, and they should publish the ratio between the pay of a chief executive and the median for the organisation, it was recommended.

CIPD chief executive Peter Cheese said: "Current levels of executive pay undermine both trust and sustainability. Fiddling around the edges of the current system won't provide the solutions we need for an innovative, productive and leading economy."

Stefan Stern, director of the High Pay Centre, added: "We need to change the nature of the conversation on pay at the top if we want to bring about better outcomes.

"This can be done by introducing the mandatory publication of pay ratios, and by bringing employee representatives on to the remuneration committee.

"Voluntary measures and modest reforms have been tried, but have not been effective."

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