PM's plans to shake up executive pay dealt a blow
Theresa May's plans to shake up corporate pay and reform business have been dealt a blow after the Bank of England's chief economist joined a chorus of company bosses in rejecting proposals on executive reimbursement.
The Bank's Andy Haldane is among those urging the Prime Minister to scrap plans for annual binding votes on pay and the publication of pay ratios between chief executives and workers.
Bosses such as Kingfisher non-executive director Clare Chapman have put their name to a report published by the Big Innovation Centre, which argues that a binding vote would mean Britain's top firms losing out on top talent.
"A binding vote undermines the reliability of contract between the company and executives, which could significantly affect the ability to of UK listed companies to attract and retain talent compared with overseas or private companies," the report said.
While admitting that action must be taken to "rebuild public confidence", the study says that pay ratios do not "lend themselves to valid comparisons between companies" and would likely add to misunderstanding over executive pay as well as potentially creating "perverse incentives".
Instead, the report argues for less complex pay structures, a "Fair Pay Charter" and giving shareholders more say on executive pay.
Mr Haldane said: "Executive pay is a matter of profound and legitimate public interest. Pay practices can encourage short-term behaviour in ways which harm both firms and the economy over the long-term.
"Moving pay practices in non-financial firms towards those in financial firms can help in tackling those problems."
When Mrs May was made Tory leader in July, she issued a number of bold statements about shaking up corporate governance.
However, the Prime Minister has already been accused of watering down the plans after ditching proposals for having workers on boards.
Asked if the Prime Minister was concerned about the report, a Downing Street spokesman said: "The PM's been absolutely clear on this issue of corporate governance, that it is an important issue that needs to be addressed.
"It's right that we have a debate about the corporate governance of the future, which is why we will be publishing a wide-ranging consultation shortly.
"We want to have this debate. We want to consult with business and seek their opinions on corporate governance, so that we can enhance what already is an excellent corporate governance structure in this country."
However, the TUC urged Mrs May to "stand up to elites" who do not live in the "real world".
"She must keep her promise to mandate worker representation on company boards, so that working people get a say on executive pay," TUC chief Frances O'Grady said.