£4m pay deals for executives ‘brings UK into disrepute’

Daily news Economy

A committee of MPs has called for action to be taken over excessive pay awards for UK company bosses.

They say the awards are damaging the UK’s reputation and want remuneration packages for business leaders to be linked to those of their workforces.

MPs on the Business Select Committee said ‘corporate greed’ was behind a sharp rise in senior management pay.

They claim that the pay of bosses at FTSE 100 firms has grown four times faster than national average earnings over the last ten years.

FTSE 100 executives earn around £4m a year, but average earnings are below £30,000, says the Commons Business, Energy and Industrial Strategy Committee.

The Business Select Committee highlighted several examples of what it called ‘shaming’ pay decisions by companies, including:

  • A £75m bonus for Jeff Fairbarn, head of housebuilder Persimmon, in 2017. Mr Fairbarn, who promised to give some of the money to charity, later stepped down amid a storm of criticism.
  • Shareholder revolts over executive pay at companies such as Unilever and telecoms firm BT.
  • A proposed £5.8m ‘golden hello’ for new Royal Mail boss Rico Black which was rejected by a 70-30 majority of shareholders.

The committee said these ‘huge differentials’ have become common, due in part to incentive-based pay packages for chief executives.

MPs said companies own remuneration committees, which set pay levels for bosses, are making things worse by approving ‘complicated and opaque’ pay packages.

Labour MP Rachel Reeves, who chairs the committee, said not enough weight was given to delivering ‘long-term value or investing in the future when setting pay.

She added that not enough effort was put into ensuring that profits are shared with workers.

Reeves said: “When the company does well, it is workers and not just the chief executive who should share the profits.

“Why should chief executives have a more generous pension scheme than those who work for them?”

A government spokesman said that the majority of large UK firms acted responsibly over executive pay.

“We understand the frustrations of workers and shareholders when they see executive pay out of step with performance.

“That is why we introduced new pay ratio and corporate governance regulations in January to make businesses more accountable for executive pay.”

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