The government has set out its planned corporate governance reform package and intends to bring legislative reforms into effect by June 2018. The reforms will include the world’s first public register of listed companies where a fifth of investors have objected to executive annual pay packages. This scheme is to be set up this autumn and overseen by the Investment Association, a trade body representing UK investment managers.

In the coming months the government is to legislate to require:

• around 900 listed companies annually to publish and justify the pay ratio between CEOs and their average UK worker;

• all companies of a significant size to explain publicly how their directors take employees’ and shareholders’ interests into account;

• all large companies to make their responsible business arrangements public.

The Business Secretary is to ask the Financial Reporting Council to introduce a new requirement in the Corporate Governance Code to ensure employees’ interests are better represented at board level of listed companies. Under the Code’s ‘comply or explain’ basis, firms would have to assign a non-executive director to represent employees, create an employee advisory council or nominate a director from the workforce. The FRC is also to be asked to work with the business community and the government to develop a voluntary set of corporate governance principles for large private companies. It intends to consult on amendments to the Code in late autumn with a view to publishing a revised code by mid-2018. The Code would then apply to the majority of companies in 2019.

The government has also announced its intention to examine the use of share buyback schemes, where companies repurchase their own shares, to ensure the method is not being used to artificially influence executive pay performance targets.

See: https://www.gov.uk/government/news/worldleading-package-of-corporate-governance -reforms-announced-to-increase-boardroom-accountability-and-enhance-trust-in-business