New regulations come into force today, 02 January 2019, to make companies \u201cjustify their pay\u201d for top bosses, the Government has revealed.<\/p>\n
The new pay ratio regulations will apply to large UK listed companies with over 250 employees.<\/p>\n
It means that, for the first time, UK companies will be required to disclose and explain every year their top executives\u2019 pay and the gap between that and their average worker.<\/p>\n
It introduces a new statutory requirement for UK listed companies to disclose annually the ratio of their CEO\u2019s pay to the median, lower quartile and upper quartile pay of their UK employees, with the first disclosures starting from 2020.<\/p>\n
The requirement will also ask large companies to report on how their directors take employee and other stakeholder interests into account and require large private companies to report on their corporate governance arrangements.<\/p>\n
The changes in legislation follow calls from investors and shareholders for companies \u201cto do more to explain how pay in the boardroom aligns with wider company pay and reward\u201d.<\/p>\n
Together, the changes form part of a packet of measures known as the UK\u2019s modern Industrial Strategy.<\/p>\n
Commenting on the announcement, Business Secretary Greg Clark said: \u201cBritain has a well-deserved reputation as one of the most dependable and best places in the world to work, invest and do business and the vast majority of our biggest companies act responsibly, with good business practices.<\/p>\n
\u201cWe do however understand the frustration of workers and shareholders when executive pay is out of step with performance and their concerns are not heard.<\/p>\n
\u201cThe regulations coming into force today will build on our reputation by increasing transparency and boosting accountability at the highest level – giving workers a stronger dialogue and voice in the boardroom and ensuring businesses are accountable for their executive pay.\u201d<\/p>\n
He added: \u201cThese new regulations are a key part of the wider package of corporate governance upgrades we are bringing forward as a government to help build a stronger, fairer economy that works for businesses and workers.\u201d<\/p>\n
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