- Title: Britain to unveil proposals to regulate company behaviour
- Date: 29th November 2016
- Summary: LONDON, ENGLAND, UK, (FILE) (REUTERS) VARIOUS OF FACTORY WORKERS
- Embargoed: 14th December 2016 16:07
- Keywords: Britain proposals regulate company behaviour executive pay
- Location: LONDON, ENGLAND, UK
- City: LONDON, ENGLAND, UK
- Country: United Kingdom
- Reuters ID: LVA0055AHZSLP
- Aspect Ratio: 16:9
- Story Text: Britain will unveil proposals on Tuesday (November 29) to encourage better corporate behaviour, part of Prime Minister Theresa May's drive to support the millions of people she says voted for Brexit in protest at 'out of touch' elites.
Her plans to have workers represented on company boards have already been watered down, however, with business minister Greg Clark saying on Tuesday the government would not "overturn" Britain's successful system of having unitary boards.
The government says it wants to stop "an irresponsible minority of privately-held companies acting carelessly - leaving employees, customers and pension fund beneficiaries to suffer when things go wrong". But its Green Paper, or consultative document, is likely to raise more questions than it answers.
May, who faces some of the trickiest negotiations since World War Two over Britain's divorce with the European Union, has pledged to look after people who are 'just about managing'. She has said she will narrow the gap between workers and company bosses by tackling excessive executive pay.
"We will explore ways to improve and extend good governance across big business so that everybody plays by the same rules and we create an economy that works for everyone, not just the privileged few," May said in a statement.
She did not name any companies, but British lawmakers have backed stripping billionaire Philip Green of his knighthood over the collapse of the BHS department store, which went into administration in April.
The proposals will look at ways to ensure that employees, customers and other stakeholders are better represented in the boardroom and that executive pay packages reflect company performance, the government said in a statement.
They will also include a demand that the largest private firms comply with "a bespoke code of practice" or explain in their annual accounts why they haven't, and make privately-held businesses report more consistently on diversity, greenhouse gas emissions and social and community issues.
The proposals will be discussed by a wide range of interested parties before a White Paper is published setting out the government's proposals for future legislation. This may also be consulted on before a formal bill is presented to parliament.
While describing the proposals as "a big change", Clark, who will deliver the Green Paper to parliament, said the government would not aim to "overturn" the tradition of company directors not necessarily being the delegates of certain groups.
"The ratio between executive pay and average pay in business is now 128 to one and we think it is important that shareholders in particular should exercise more influence. So one of the proposals that we are making today is that there should be binding votes on executive pay."
On executive pay, he said the government will propose ways of curbing excessive rates, including considering whether there should be an annual binding vote by shareholders.
"One of the problems is that there has not been a mechanism for shareholders' votes to have a decisive influence so rather than just an advisory vote which can and has been ignored what we are putting forward in this consultation is that if there is a vote on pay it should be binding," added Clark.
The High Pay Centre welcomed the move.
"Over the past 20 years we have seen top pay go up massively, when it used to be 45 times the average worker it is now 150 times or more. There is not obvious reason why that should be the case and these interventions today are really an effort to do something about that," said Stefan Stern, Director of the High Pay Centre.
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