Government to require businesses to justify executives’ salaries

small business confidence

New plans outlined by the government could require large businesses to justify executives’ salaries.

Under the plans, firms with more than 250 employees will need to disclose and explain pay ratios annually.

Large businesses will be required to justify executives’ pay and explain the gap between their chief executive’s salary and that of an average worker. Directors will also have to demonstrate that they are acting in the best interests of all their employees and shareholders.

Commenting on the plans, Business Secretary Greg Clark said: ‘Most of the UK’s largest companies get their business practices right, but we understand the anger of workers and shareholders when bosses’ pay is out of step with company performance.

‘Requiring large companies to publish their pay gaps will build on that reputation by improving transparency and boosting accountability at the highest levels, while helping build a fairer economy that works for everyone.’

The Confederation of British Industry (CBI) welcomed the proposals. It stated that high pay ‘is only ever justified by outstanding performance’, and that the plans will help to deliver a ‘better dialogue between boards and employees’ in regard to the goals and aspirations of their business.