According to a new research from a thinktank, government measures to tackle excessive executive pay in the UK have flopped. Between 2014 and 2018 – the first five full years of the attempted clampdown – every pay policy put to an annual meeting of a FTSE 100 company was approved by shareholders, the High Pay Centre has reported. In 2016, in the run-up to becoming prime minister, Theresa May proposed allowing employee and consumer representatives to sit on company board before backtracking on the plan.
In 2012, David Cameron, the then prime minister, announced a crackdown on excessive executive pay. As a result, the Enterprise and Regulatory Reform Act 2013 gave shareholders a binding – rather than advisory – vote on their companies’ executive pay policy at least once every three years. This went alongside the existing advisory vote on a company’s pay report detailing what it paid the directors in the previous year.
Investors, though, seem unwilling to use this power to rein in excessive executive pay. Last year, a narrow majority approved a controversial £75m bonus handed to housebuilder Persimmon’s chief executive, Jeff Fairburn, despite widespread anger. The High Pay Centre also found that across more than 700 pay-related resolutions voted on at annual meetings over the period, the average level of shareholder dissent was 8.8%. Only 11% of pay-related resolutions attracted dissent levels of more than 20%. And only six advisory votes on the pay packages awarded in previous years were defeated, which was “barely 1% of the total”.
The findings come despite median levels of chief executive pay climbing to £3.9m in 2017, the most recent year for which full figures are available – an increase of 11%. That is about 137 times the annual salary of the typical UK worker, the thinktank said.
“Polling has repeatedly shown public support for more meaningful measures to address very high pay and economic inequality, including caps on top pay and worker representation on company boards,” it added.
Executive pay and perks rows continue to flare up: days ago, MPs stepped up the pressure on Lloyds Banking Group over excessive pensions for senior staff, while last week it emerged that the boss of Britain’s biggest gambling company, the Ladbrokes owner GVC, was paid £19.1m in 2018, potentially putting the company at risk of a clash with shareholders.
Responding to the study, shadow business secretary Rebecca Long-Bailey said: “Today’s findings sadly tell us what we already know: that Tory policies have failed to tackle excessive executive pay in some businesses, which is contributing to rampant inequality.”