The U.K. will outline plans for a crackdown on business executives’ salaries and bonuses as Prime Minister Theresa May’s government seeks to narrow the wage gap between average workers and their bosses.
The proposals, which will be published for consultation on Tuesday, will seek to set up staff scrutiny committees, force firms to publish pay ratios between chief executive officers and average employees, and give shareholders binding veto powers on executive pay, U.K. Work and Pensions Secretary Damian Green said on Sunday.
“What the proposals are about is making sure that people have faith in the capitalist system and they can see it’s working for everyone, not just the privileged few,” Green told Sky News. “People feel dissatisfied with the system,” he said. It “is a very, very important project for this government,” Green said.
The proposal “is a vital step to meeting the aims and ambitions the prime minister identified” in a speech to business leaders last week, “defending and promoting globalization by making sure it works for everyone,” May’s office said in an e-mailed statement Nov. 21. A consultation period on the plan will begin with the publication of the proposals and the government will listen to the proposals, it said.
U.K. business leaders backed by the Bank of England challenged May’s calls to restrict executive pay, in a report published on Friday. The Purposeful Company Taskforce is recommending pay policies that encourage long-term performance, stopping short of binding votes on wages.
Workers will have representation on remuneration committees, Green said, though the plans stop short of workers on boards, a measure proposed by May when she was running for the Conservative Party leadership in July.
Along with greater transparency on pay ratios, having a say in senior pay rates will make workers “feel” that they are sharing in the success of the company, Green said. The proposals are also intended to strengthen the opportunities for shareholders to block excessive pay awards.
“Often the problem in the past has been that the shareholders haven’t had the power, or in some cases the inclination, to actually protest or to say we don’t find this acceptable,” Green said. “This will give the power to the shareholders.”