In the coming months, the Government will introduce new laws that will require listed companies to annually publish, and justify, the pay ratio between CEOs and their average employee, it was announced on Tuesday (29 August).
Business secretary Greg Clark said the reforms will “enhance the transparency of big business to shareholders, employees and the public”.
These will include the world’s first public register of listed companies where a fifth of investors have objected to executive annual pay packages.
The new scheme will be set up in the autumn and overseen by the Investment Association, a trade body that represents UK investment managers.
The move comes after Prime Minister Theresa May said the behaviour of a small number of companies had “damaged the public’s trust in big business” last year.
Stephen Haddrill, CEO of the Financial Reporting Council (FRC) – which will work with the business community and the Government to develop a voluntary set of corporate governance principles for large private companies – said the UK’s reputation for good corporate governance, has “underpinned British business success”.
“How we develop the framework will be key to boosting competitiveness, transparency and integrity in business, particularly after Brexit,” he said.
“Successful and sustainable business are not just good for the economy, they support wider society by providing jobs and helping to create prosperity.”
He continued: “Large private companies are integral to the UK economy as significant employers and supporters of communities and families.
“It is right that we develop a set of corporate governance principles to enhance confidence that they act in the public interest.”
The Government intends to bring legislative reforms into effect by June 2018.