1Introduction
1.In her one campaign speech before becoming Prime Minister, Theresa May criticised “an irrational, unhealthy and growing gap between what the companies pay their workers and what they pay their bosses.”1 The Government’s subsequent 2016 Green Paper acknowledged “a widespread perception that executive pay has become increasingly disconnected from both the pay of ordinary working people and the underlying long-term performance of companies.”2 Since then there have been a number of high profile pay awards by leading companies that appear both extremely generous and patently unjustified. At a time of slow wage growth—when public attention is more focussed on fairness in pay—these awards have served to undermine the reputation of British business and accentuate perceptions of unfairness.
2.This report covers the second strand of our inquiry into Delivering on fair pay, following our report on the Gender Pay Gap in 2018.3 It provides an update on trends on executive pay and examines the Government’s performance in addressing the pay gap it previously identified. Our predecessor Committee made a number of recommendations relating to the structure, agreement and public reporting of executive pay in its report on Corporate Governance in 2017.4 Our report tracks the implementation of those recommendations and aims to hold the Government to account for its response to continuing bouts of corporate excess. At a time when the role of regulators is under scrutiny and reforms are imminent, we propose further measures to assist the Government in delivering on its ambitions.
3.In the course of this inquiry we took evidence from a range of investors and analysts, selected companies, interest groups, professional advisory firms, the TUC, the Financial Reporting Council and Ministers. We also held private meetings, organised by The Investment Association, with investors and corporate governance leads. We also benefited from the advice of Katharine Turner of FIT Remuneration Consultants. We are grateful to all those who submitted evidence or otherwise contributed to this inquiry.
2 BEIS, Corporate Governance Reform Green Paper, November 2016, p16
Published: 26 March 2019