Executive Pay

As you made clear in your correspondence, the government stood on a platform in the recent election which promises to cultivate a genuinely meritocratic society. Central to this is a simple and transparent executive pay framework, where CEOs are accountable, and employees are well informed.

My understanding is that the consultation on this subject has been ongoing and has explored a variety of ways in which abuses and excesses in the boardroom could be tackled. Specifically, a requirement to subject executive pay policies to shareholder approval, as wells as mandatory disclosure of director’s pay as a single figure, have been viewed as prudent options. Indeed, the consultation has found that since these measures were first introduced in 2013, average executive pay increases have been broadly in line with inflation.

However, executive pay has arguably continued to be a key factor in public dissatisfaction with large businesses and a source of frustration to UK investors. It is therefore important that new efforts address concerns that a minority of companies are not responding adequately when they encounter significant shareholder opposition to levels of executive pay.

Greg Clark MP, the Secretary of State for Business, Energy and Industrial Strategy, spoke in the house on the 6th September on this matter and the efforts that would be made in this Parliament to address it. His statement can be found at the link below:

https://hansard.parliament.uk/Commons/2017-09-06/debates/17090637000009/CorporateGovernanceReformGreenPaper?highlight=executive%20pay#contribution-33DBEE80-165B-40D1-8139-25413B5CDED0

Ultimately, I think these efforts are a step in the right direction. Tying directors to shareholders will ensure that executive pay remains linked to wages and broader company performance, whilst public disclosure of CEO earnings will ensure transparency.