Labour mulls executive pay curbs
Giving a company’s customers as well as employees a vote on executives’ pay, cash-only bonuses and a requirement to publish the names of those with salaries over £150,000 are among the proposals for curbing excessive boardroom pay set out in a policy paper for the Labour party
29 Nov 2018
The paper, which is not Labour policy but is intended to contribute to the debate around top level remuneration, recommends that employees and consumers should be empowered to vote on executive pay in large corporations and calls for disclosures and revised remuneration approval practices.
The proposed reforms would apply to over 7,000 companies, classified as large companies under the Companies Act 2006.
They include the recommendation that bonuses, if any, should only be paid for ‘carefully specified and extraordinary performance’, while pay differentials between executives and employees analysed by gender and ethnicity to be published.
Companies would be required to reveal the names and number of employees, analysed by gender and ethnicity, earning more than £150,000 per annum in brackets of £10,000. Directors would be required to explicitly state in their annual report, that no employee has received remuneration which is less than the National Minimum Wage or the Living Wage.
The remuneration of each executive at large company would be the subject of an annual binding vote by stakeholders, including shareholders, employees and consumers, and the paper advocates changing company law to give stakeholders the right to fix an upper limit or ‘cap’ on an executive remuneration package.
It also states: ‘Golden handshakes, hellos, handcuffs, parachutes, goodbyes and severance have all become a way of boosting executive remuneration and must be prohibited.’ There is a proposal for an upper limit on the tax deductibility of total executive remuneration for each person.
In the case of companies with deficits on their employee pension scheme, the review recommends their directors must not be eligible to receive any bonus or increase in remuneration unless they have reached a binding deficit reduction agreement with the Pensions Regulator.
Rebecca Long-Bailey, shadow business secretary, said: ‘Whilst many of our businesses work hard to ensure that rewards and prosperity are fairly shared across their workforce, there continues to exist a pernicious corporate culture in some firms that many across Britain would view as immoral.
'It cannot be right that in just three working days, the UK's top bosses will have made more money than the typical full-time worker will earn in the entire year.
'Labour will look closely at the recommendations of this report as we seek to build on our existing policy of tackling pay inequality.'
The remuneration review was commissioned by Rebecca Long-Bailey, shadow business secretary, and John McDonnell, shadow chancellor, and was prepared by a team headed by Prem Sikka, professor of accountancy and finance at Sheffield University.
Report by Pat Sweet