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UK-listed companies to publish pay ratios by law

  • U.K. publicly listed companies to have to publish pay differentials between senior executives and average employees under new government reforms.
  • The plans aim to tackle excessive boardroom pay.
  • Critics argue the measures have been watered down since proposals were first announced.
The financial offices of banks, including JPMorgan Chase, Citi, HSBC, and other institutions in the financial district of Canary Wharf, are pictured from Greenwich Park in London on January 17, 2017.
Ben Stansall | AFP | Getty Images
The financial offices of banks, including JPMorgan Chase, Citi, HSBC, and other institutions in the financial district of Canary Wharf, are pictured from Greenwich Park in London on January 17, 2017.

British listed companies will soon have to reveal and justify the difference in pay between their chief executive and their average employee, under new reforms aimed at tackling excessive boardroom pay.

Public businesses where more than one-fifth of shareholders are opposed to the salaries of board members will then be named and shamed on a public register, according to new government measures to be published Friday.

Britain's business secretary Greg Clark said the rules would make companies "more accountable to their employees and shareholders," yet critics have insisted that the plans have been watered down.

The Prime Minister, Theresa May, is pictured while speaks to the media at Downing Street, following the Manchester terror attack, London on May 23, 2017.
Alberto Pezzali | NurPhoto | Getty Images
The Prime Minister, Theresa May, is pictured while speaks to the media at Downing Street, following the Manchester terror attack, London on May 23, 2017.

British Prime Minister Theresa May announced an offensive against the "unacceptable face of capitalism" when she came into power last July, and pledged to do more to shrink pay differentials between senior executives and their staff.

However, Tuesday's reforms strip back earlier plans to put workers on board and give shareholders binding votes.

The final guidelines will see companies given a choice between assigning a non-executive director to represent staff, creating an employee advisory council, or nominating a director from the workforce. This means that companies will no longer by obliged to give employees a direct seat on their board.

Britain's shadow business secretary Rebecca Long-Bailey said that the changes were an example of the incumbent Conservative party's tendency to back big business.

Klaus Vedfelt | Getty Images

"(These plans are) just more crony capitalism from the Tories, who once again prop up the rigged system for the few at the expense of the many," Long-Bailey said, according to Reuters.

May's government has had to work closely with business leaders over recent months as it seeks to secure their loyalty to the U.K. post-Brexit.

Frances O'Grady, the head of the Trades Union Congress, told BBC Radio on Tuesday that the revised plans would not help public frustration with what are perceived as excessive pay packets. A report released earlier this month showed that the average FTSE 100 chief executive earns 160 times that of the average British worker.

"I am afraid that the government has bottled it in the face of business lobbying and that doesn't bode well for really tackling some of these big problems," O'Grady told BBC Radio.

The new corporate governance laws are due to come into effect by June 2018 and will impact approximately 900 publically listed businesses in Britain.

They follow the publication of top BBC salaries in July, another of the government's continued efforts to improve transparency.

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