Critics blast Government's 'feeble' plans to curb corporate excess
Listed firms will be forced to reveal the pay ratio between bosses and workers under plans to tackle corporate excess but critics say the package falls far short of Theresa May's rhetoric on the issue.
Firms with significant shareholder opposition to executive pay packages will be named on a public register under the reforms.
But the Government was accused of a "feeble" approach to boosting the voice of workers in boardrooms, with the possibility they could be represented by a non-executive director rather than have a seat on the board in their own right.
The Prime Minister had vowed during her campaign for the Tory leadership that "we're going to have not just consumers represented on boards, but workers as well".
Under the reforms published by ministers t he Financial Reporting Council (FRC) is to amend its UK Corporate Governance Code so firms can either assign a non-executive director to represent employees, create an employee advisory council, nominate a director from the workforce, or explain why they cannot do this.
TUC general secretary Frances O'Grady said: "It's a feeble proposal, spelling business as usual for boardrooms across Britain.
"The Prime Minister's pledge to put workers on company boards has been watered down beyond all recognition."
The proposal on worker representation is "different to what has been promised", a senior member of the FRC acknowledged.
Paul George, executive director of the corporate governance and reporting division of the FRC told BBC Radio 4's Today programme: "I think you need to wait before you conclude on whether they are feeble or not in terms of what the combination of the package that the Government has put forward this morning plus how the FRC and others will take that forward."
He added: "I think the board as a whole rather than individual directors having a responsibility to explain how they had regard for broader stakeholders in their key decisions will have an impact and is likely to have a better impact than having some form of tokenism in terms of representation, so you can tick the box that you've done something, but have you delivered the principle which is better engagement with wider stakeholders."
Mrs May had already ruled out following the example of Germany, where workers are guaranteed representation on the supervisory boards of large firms.
Business Secretary Greg Clark insisted that the measures would "ensure our largest companies are more transparent and accountable to their employees and shareholders".
The package includes:
:: Forcing around 900 listed firms to annually publish and justify the pay ratio between the chief executive and their average UK worker.
:: A public register to name and shame firms where a fifth of investors have objected to executive pay packages.
:: All companies of a significant size being required to publicly explain how directors take employees' and shareholders' interests into account.
:: The FRC developing a voluntary set of corporate governance principles for large private firms.
Business groups welcomed the plans, but opposition parties tore into them.
CBI president Paul Drechsler said: "If pay ratios include meaningful context they could prove a useful addition to the debate about executive pay.
"Providing shareholders with a 'say on pay' has been an effective tool and a public register will help to shine a light on the small minority of cases that warrant greater attention."
Shadow business secretary Rebecca Long-Bailey said: "These proposals are just more crony capitalism from the Tories, who once again prop up the rigged system for the few at the expense of the many."
Liberal Democrat leader, and former business secretary, Sir Vince Cable dismissed the Government's approach as "strong on rhetoric, weak on action".
He said: "The new corporate governance code for large private companies - such as BHS - is voluntary and therefore likely to have little effect."
Downing Street claimed Mrs May had been "pretty consistent" in her approach to workers' representation on boards.
"She wants to improve workers' representation and that's going to be achieved with part of this report, which is about changes to the corporate governance code," a Downing Street spokeswoman said.
"From her perspective, her position has been consistent and has not changed."
Labour's Rachel Reeves, c hairwoman of the Commons Business select committee, said: " I welcome the Government's intention to improve transparency on executive pay and to force companies to explain better how they are behaving responsibly, especially following so many examples of performance not matching some staggering pay packets.
"A new Code for private companies is a positive step forward, but without tough and effective enforcement mechanisms it is unlikely to be enough.
"The previous BEIS select committee proposed a number of measures to curb executive pay and make companies more accountable to shareholders, employees and stakeholders.
"The Government has shied away from this tough approach and in doing so makes business as usual the easy option for business executives, rather than reform to tackle the excess and greed that holds back our economy and pay for everyone else."