BEERG: UK Labour Party Considering Giving Workers and Customers a Say on Executive Pay

December 07, 2018

Employees and customers of Britain’s 7,000 biggest companies would be given the ability to vote on the pay of senior executives under plans for restrictions on boardroom pay being considered by Labour.

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 per year.

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:

  • That executive remuneration contracts in large companies are made publicly available;

  • That executive remuneration is in cash, because rewards in share options, shares, and perks allegedly invite abuses;

  • That pay differentials between executives and employees analyzed by gender and ethnicity be published;

  • That company law be amended to give all stakeholders the ability to propose a cap on executive pay and bonus package; and

  • That the remuneration of each executive at large companies is subject to an annual binding vote by a range of stakeholders.

The plans were branded “unprecedented and unhealthy” by Roger Barker, head of corporate governance at the Institute of Directors.  Mr. Barker said: “Rather than promoting improved trust and harmony between business and society, they create the risk that companies become battlegrounds where parties seek to assert their interests.”

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