Last week the BEIS Select Committee published its report "Executive rewards: paying for success", which provides an update on trends in executive pay and the government's actions to address the pay gap between executives and other staff. The report concludes that at a time of stagnant or minimal pay growth for most workers, large pay differentials between senior executives and the rest of the workforce undermines support for the current economic model and reduces trust in business. Amongst other things, the report calls for:
- Regulators to assess which method of employee engagement (directors appointed by the workforce, formal workforce advisory panels, or designated non-executive directors) is most effective;
- The extension of pay ratio reporting requirements to all employers with over 250 employees;
- At least one employee representative to sit on remuneration committees, to ensure a full discussion of the link between executive and workforce pay;
- The simplification of executive pay structures, which should be based on fixed basic salary plus deferred shares vesting over a long period;
- Executive variable pay to be substantially reduced, with remuneration committees setting a cap on total annual remuneration;
- Pension contributions for executives and the wider workforce to be aligned; and
- Greater use of schemes designed to share profits more evenly between executives, shareholders and the wider workforce.