Theresa waters down her plan for major curbs on fat cat pay

THERESA May’s plans to curb boardroom excess were watered down yesterday following protests from business.

The Prime Minister’s call for binding annual shareholder votes on executive pay are now likely to apply only to some firms, if they happen at all. Plans to put workers on company boards have been replaced with proposals that could see staff ‘represented’ by a named company director.

And plans to force companies to publish ‘pay ratios’ highlighting the difference in salary between the chief executive and the lowliest worker also look set to be watered down, amid concerns they could be ‘misleading’.

The three measures were part of a reform package announced by Mrs May in July to help rebuild public confidence in business following a number of scandals at companies such as Sports Direct and BHS. At the time, Mrs May highlighted public concern about fat cat pay, saying she wanted to close the ‘irrational, unhealthy and growing gap between what (some) companies pay their workers and what they pay their bosses’.

But yesterday’s long-awaited consultation on corporate governance reform suggests the final plans will be toned down following lobbying by business.

Iain Wright, chairman of the Commons business committee, said the ‘tentative’ proposals suggested ‘a Government whose resolve may have weakened on getting to grips with corporate governance’.

But business broadly welcomed the change of tone, with the Institute of Directors hailing the package of reforms as ‘pragmatic’. Launching the plans yesterday, Mrs May said the Government was ‘unequivocally and unashamedly pro-business’, but added: ‘For people to retain faith in capitalism and free markets, big business must earn and keep the trust and confidence of their customers, employees and the wider public.’

Business Secretary Greg Clark told MPs the UK continued to have some of the tightest corporate governance rules in the world, and said concerns related to ‘a very small number of businesses which have undermined the reputation of British business generally’.

According to the High Pay Centre, the chief executives of FTSE 100 firms now have a median pay package of £4.3million, which is 140 times that of the average worker.

The British Chambers of Commerce said although there was a real appetite to tackle abuses, ‘reforms need to be proportionate’.