Customers of Britain’s 7,000 biggest companies would be given the right to vote on the pay of top executives under plans for a clampdown on boardroom pay being considered by Labour (November 27th).
A report commissioned by Rebecca Long-Bailey, the shadow business secretary, and John McDonnell, the shadow chancellor, calls for an annual binding vote on executive packages to include all stakeholders – including employees and consumers.
Other suggestions include scrapping all forms of share options so that executives are paid only in cash, a ban on golden handshakes and punitive fines for directors of companies that persistently fail to pay the minimum wage. The report also proposes that all companies in Britain with more than 250 staff would have to reveal the names of employees paid more than £150,000 a year.
Coming in the wake of a study by the International Labour Organisation earlier this week showing that wage growth in Britain had been the weakest of nine advanced countries over the past decade, the report says its 20 recommendations are necessary to “curb undeserved executive pay and also create mechanisms for better distribution of income”.
Labour, which is seeking to show it is ready to fight a snap election if Theresa May’s government collapses over ‘Brexit’, gave a warm welcome to the report commissioned from a team led by Prem Sikka, professor of accountancy and finance at Sheffield University.
Party sources stressed it would be wrong to assume all the suggestions would make it into the party’s next manifesto but Long-Bailey and McDonnell are well disposed towards five key reforms proposed by Sikka:
- That executive remuneration contracts in large companies be made publicly available
- That executive remuneration be in cash, because rewards in share options, shares and perks invited abuses.
- That pay differentials between executives and employees analysed by gender and ethnicity be published
- Company law be amended to give all stakeholders the right to propose a cap on executive pay and bonus package
- The remuneration of each executive at large companies be subject to annual binding vote by a range of stakeholders.
- Stakeholders includes shareholders, long-term customers and employees.
Long-Bailey said: “Whilst many of our businesses work hard to ensure that rewards and prosperity are fairly shared across their workforce, there continues to exist a pernicious corporate culture in some firms that many across Britain would view as immoral.
“It cannot be right that in just three working days, the UK’s top bosses will have made more money than the typical full-time worker will earn in the entire year. Labour will look closely at the recommendations of this report as we seek to build on our existing policy of tackling pay inequality.”
