Frances O’Grady, general secretary of the TUC, said the final result was a ‘far cry’ from Theresa May’s original promise to crack down on corporate excess © AFP
Theresa May’s plans to take on irresponsible capitalism were condemned as “feeble” by the Trades Union Congress, which said they amounted to business as usual for British boardrooms.
Mrs May had warned last year of a day of reckoning for Britain’s boardrooms in hopes of rebranding the Conservatives as the party of the British working class.
But her two most radical proposals — putting workers on boards and annual binding pay votes — have both been dropped from the final package, which will be unveiled on Tuesday.
Frances O’Grady, general secretary of the TUC, said the final result was a “far cry” from Mrs May’s original promise to crack down on corporate excess.
“The prime minister’s pledge to put workers on company boards has been watered down beyond all recognition. This now amounts to little more than a box-ticking exercise,” she said on Monday night.
Vince Cable, leader of the Liberal Democrats, accused the prime minister of a climbdown, describing her new policy as “strong on rhetoric, weak on action”.
“Theresa May’s climbdown is disappointing, with the government reportedly abandoning plans both to give workers representation on boards and more regular votes for shareholders on boardroom pay,” said the former business secretary.
But proposals were hailed by business groups, including the Institute of Directors. Stephen Martin, director-general of the IoD, warned that pay ratios could be a crude measure — but said he otherwise welcomed the “pragmatic” and “sensible” approach by ministers.
The Pensions and Lifetime Savings Association, which represents investors, called the proposals “reasonably good” but said it was not clear how much impact they would have.
Luke Hildyard of the PLSA said the group was disappointed that the government had ignored proposals from the industry that would require executive pay packages to garner a new, higher “supermajority” of 75 per cent of shareholder votes. “They missed an opportunity there,” he told the Financial Times.
Mrs May’s original plans were heavily influenced by Nick Timothy, her joint chief of staff, who resigned in the wake of her disappointing general election campaign. Philip Hammond, the chancellor, campaigned behind closed doors against the most radical initiatives.
Now the package consists of three main proposals:
First, all listed companies will have to reveal the pay ratio between bosses and typical workers, a move that has long been resisted by executives.
The second policy is the creation of a new public register to name and shame all listed companies that have had significant shareholder opposition — by a fifth of investors — to executive pay packages.
Many critics are underwhelmed by this idea, since the information is already in the public domain. It falls far short of the original plan for annual shareholder votes on boardroom pay.
The third initiative is designed to give workers a voice in the boardroom without actually giving them a seat at its table.
The Financial Reporting Council will introduce a new requirement that companies assign a non-executive director to represent employees, create an employee advisory council or nominate a director from the workforce.
The reforms will be in force by June 2018.
Rebecca Long-Bailey, Labour’s shadow business secretary, accused the government of watering down the original promise on increasing workers’ representation.
On the pay vote register, she said: “The government wants the Investment Association, the trade body for the City’s largest investors, to keep this register. So, it begs the question, who are the Tories creating this for?”
Stefan Stern, director of the High Pay Centre think-tank, said that forcing companies to publish pay ratios was a “big deal” that would shed a light on companies ignoring their shareholders. “We’ve been told for years that pay ratios would never happen, should never happen and could never happen. Well, they’re happening.”
That data had been a crucial missing piece of evidence in the debate over pay, he argued. “It’s true that the measures announced today do not go as far as originally suggested a year ago. But this nonetheless represents progress, and a useful resetting of the context for discussions over executive pay.”