This month, MP's have criticised the government again for failing to reduce boardroom pay packages.
In recent years, it has come to light that company Chief Executive Officers (CEO's) are paid in excess in comparison to their employees. This has led to public outrage as many have argued that the success of a business is not solely down to the CEO but also the efforts of workers and that this should be reflected, by allowing for them to have a share of the pay or at least for the gap to be reduced.
Indeed, should pay be a reflection of actual performance or status?
Some may recall, that in attempt to curb the extravagant pay packagers (or at least incite a conversation on these) the Pay Ratio Obligations were introduced in 2018. The obligations mean that it will be a statutory requirement for companies listed on the LSE with more than 250 staff, to disclose the ratio of chief executives remuneration to the median pay of their UK employees every year. The first disclosures will be released in 2020.
In addition to the above, the Investment Association have set up a public register of shareholder revolts over pay. Yet, even though these checks and balances have been put in place, there still remains a massive disparity between median pay employees and those at the top. To address this the BEIS committee has called for greater use of profit sharing schemes and an absolute cap on chief executives remuneration, the idea being that employees should have a say in how their senior executives are paid.
MP's had previously put forward a proposal that workers should sit on company pay committees to challenge the perspective on executive rewards. Whilst the government has said that several companies have begun to invite employees to attend pay committee meetings, many feel that this is not enough.
Perhaps a more robust approach in this area, would increase employee morale at work, as employees will feel that they are reaping more benefits from contributing to the success of a company; if there was a more fairer and transparent approach to pay in place. The government has recommended that remuneration committees and shareholders should be the ones to decide on an absolute cap on total CEO pay, but this has not been implemented more formally or though law.
It seems that all that can be done for now is to wait and see the reaction to the 2020 figures that will be disclosed and whether or not this will incite the government to take more action.
Government has failed to rein in 'extravagant' CEO pay, say MPs