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Listed companies must publish pay ratios

Last updated: 11:31am 22 February 2019

The next Conservative government will legislate to make executive pay packages subject to strict annual votes by shareholders and listed companies will have to publish the ratio of executive pay to broader UK workforce pay.

Conservative Party Manifesto 2017, p.18

Our verdict

Pay ratios show the difference in pay between the top salaries and the lowest salaries. Listed companies are companies that trade their shares on the stock market. This promise is to ensure that listed companies “have to” publish pay ratios each year.

In August 2017 Business Secretary Greg Clarke confirmed that the government would be introducing new reforms which will require around around 900 listed companies (i.e. not all) to annually publish – and to justify – the pay ratio between executives and their average worker.

The reforms were first proposed before the election as part of a ‘corporate governance’ consultation. This government responded in August 2017, and a new Corporate Governance Code was published in 2018. In that code is a new requirement for organisations to “report annually the ratio of CEO pay to the average pay of their UK workforce”.

So ordinarily this promise looks like it has been delivered. However, the first consideration to make is that the Corporate Governance Code does not apply to all listed companies. The second consideration is that it is not compulsory, but works on a ‘comply or explain’ basis. That means if companies choose not to comply they must explain to their shareholders (not to the government or the FRC who sets the corporate governance code) why they don’t feel compliance is necessary.

It’s now more difficult to conclude that the promise that listed companies “will have to” report pay ratios has been delivered. We’ll be updating this page with comments from other organisations in this field, and for now are marking this as ‘in progress’. Follow this policy for updates.

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