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Institute of Directors backs May on proposals to shake up big business

Published 11/07/2016

Theresa May set out plans to change the way big businesses are governed
Theresa May set out plans to change the way big businesses are governed

Theresa May's proposals to shake up executive pay and governance have been given the seal of approval by a leading business group.

The Institute of Directors (IoD) said it is "broadly supportive" of the prime ministerial hopeful's proposals, which include binding votes on executive pay, having employees on boards and aligning executive pay closer to staff pay.

Oliver Parry, the IoD's head of corporate governance, said: "Theresa May has identified problems and is proposing remedies. When it comes to having workers on boards, there would be challenges in terms of training and induction, but it's something we support if done on a voluntary basis.

"We're also in favour of either annual binding votes on executive pay, rather than the current three years, or having flexibility from boards if circumstances demand that pay should be reviewed. On pay ratios, it's not always helpful, but it's something we would support on a voluntary basis."

Mrs May suggested a raft of changes in a newspaper column published on Monday.

The Home Secretary pledged that if she becomes prime minister, she will push for consumers and employees to be represented on company boards, make shareholder votes on pay binding rather than advisory and make transparent the ratio between chief executive pay and the average company worker's pay.

She said: "It is not anti-business to suggest that big business needs to change. Better governance will help these companies to take better decisions, for their own benefit and that of the economy."

Mr Parry agreed that the proposals are not anti-business.

"There is a problem that companies are seen to be detached from society, so it's a good thing," Mr Parry said.

A number of firms were given bloody noses earlier this year when shareholders revolted over mammoth pay deals.

BP faced a humiliating shareholder rebellion over executive pay in April, when almost 60% of shareholders rejected the oil giant's remuneration report, which awarded boss Bob Dudley £13.8 million.

More than a third of shareholders in advertising giant WPP refused to back boss Sir Martin Sorrell's mammoth £70 million pay deal, and mining giant Anglo American also faced investor protests after 42% of shareholders voted against chief executive Mark Cutifani's £3.4 million pay package for 2015.

However, the votes were non-binding and advisory only.

TUC general secretary Frances O'Grady also welcomed Ms May's "common-sense approach", offering to meet her to discuss the proposals.

She said: "Workers have a clear interest in the long-term success of their companies and deserve a bigger say.

"This move would inject a much-needed dose of reality into boardrooms, as well as putting the brakes on the multi-million pay and bonus packages which have done so much to damage the reputation of corporate Britain."

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