Business chiefs urge curbs on excessive executive pay as public concerns grow

Business needs to consider implications for public trust says the CBI
Business needs to consider implications for public trust says the CBI

Business leaders are calling for measures to curb excessive executive pay amid warnings that “fiddling around the edges” is not enough to tackle the issue.

A number of groups have responded to a Government consultation, telling ministers there has never been a more important time to build public trust in business.

The CBI, which represents 190,000 businesses, said shareholders should be given more powers to have a final say on executive pay where it has “disconnected” from exceptional performance.

Its recommendations included information on the pay of executives and other employees.

CBI president Paul Drechsler said executive pay has become a lightning rod for public discontent, adding: “The CBI is absolutely clear that the unacceptable behaviour of the few does not reflect the high standards and responsible behaviour of the vast majority of companies.

“Our proposals seek to address some of the issues that have undermined the reputation of business. Where chief executive pay has become disconnected from performance, shareholders should have the power to show the company a ‘yellow card’.

“Firms that lose their advisory vote on pay or receive 25% or more vote against the directors’ remuneration report for two consecutive years, should face a binding vote on policy at their next AGM.

“Any pay ratio publication should focus on the trends within a company’s UK workforce - showing how the variance between executive pay and average worker pay is changing over time. This way, pay ratios may provide meaningful transparency and value to this debate.”

A joint response from the Chartered Institute of Personnel and Development and the High Pay Centre calls for a “major rethink” of corporate governance.

Publicly listed firms should have at least one employee on remuneration committees, and they should publish the ratio between the pay of a chief executive and the median for the organisation, it was recommended.