The UK Government has rejected a proposal to expand executive pay reforms, in an official response by the House of Commons this week. The proposal, which was submitted by the Business, Energy and Industrial Strategy Committee (BEIS) in March, called for companies to be required to appoint at least one employee on the remuneration committee, as well as expand pay ratio disclosures to non-listed firms, set caps on executive pay, and use profit-sharing plans to link executive pay to average employee pay.
The government's response noted that given its recent strengthening of the Corporate Governance Code, including requiring remuneration committees to discuss CEO pay in the context of worker pay and introduction of a pay ratio requirement, further reforms were not a priority. Importantly, the response highlighted the fact that "the huge variety of UK companies and group structures mean one method will not suit all" and that "it is for Remuneration Committees and shareholders to decide whether executive pay policies should set an absolute cap on total remuneration." However, the Government also noted it was aware that "several companies are already considering inviting an employee representative to attend at least one meeting of the remuneration committee each year" (such as Capital Plc, which recently became the first major UK company in 30 years to appoint employees to its board). Prime Minister Theresa May came under criticism for failing to make good on her own calls for worker representation on boards when she first came to office.