The Conservative manifesto includes the following proposals:
“The next Conservative government will legislate to make executive pay packages subject to strict annual votes by shareholders and listed companies will have to publish the ratio of executive pay to broader UK workforce pay. Companies will have to explain their pay policies, particularly complex incentive schemes, better. We will commission an examination of the use of share buybacks, with a view to ensuring these cannot be used artificially to hit performance targets and inflate executive pay.
Boards should take account of the interests not just of shareholders but employees, suppliers and the wider community. To ensure employees’ interests are represented at board level, we will change the law to ensure that listed companies will be required either to nominate a director from the workforce, create a formal employee advisory council or assign specific responsibility for employee representation to a designated non-executive director. Subject to sensible safeguards, we will introduce, for employees, a right to request information relating to the future direction of the company.
These strengthened arrangements will apply to publicly-listed companies. We will consult on how we might strengthen the corporate governance of privately-owned businesses.”
With these general proposals having been aired for some time, companies now want more detail, but this is unlikely to emerge in the election campaign or be the subject of great debate between the parties. However, if the Conservatives are returned to Government it is clear that the rather surprising Conservative legislative interest in this area will continue and will not just be the subject of corporate governance codes, but actual legislation.
By way of background, in November 2016 the Government published a Green Paper on Corporate Governance Reform. Click here for our articles about the proposals in the Green Paper on remuneration and on strengthening the voice of employees and other stakeholders in large companies and improving corporate governance in large unquoted companies. In April this year the House of Commons Business, Energy and Industrial Strategy Committee published its own proposals on directors’ pay in quoted companies. Click here for our article about the Committee’s proposals.
To link to the Conservative manifesto, please click here.