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MPs to launch new investigation into excessive boardroom pay

Jake Cordell
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Sir Martin Sorrell
Sir Martin Sorrell is the highest paid FTSE 100 chief executive (Source: Getty)

MPs will launch a wide-ranging review into executive pay tomorrow after prime minister Theresa May promised to get tough on the country's top paid bosses.

The Business, Innovation and Skills (BIS) Committee will unveil the terms of a corporate governance inquiry tomorrow, which will look at the issue of what to do about runaway executive pay following years of disquiet in the City.

The investigation will also look at ways to promote more diverse boardrooms and assess proposals to give employees a seat at the top table.

The announcement comes after the summer saw another string of high-profile shareholder revolts at the likes of WPP, BP and Weir Group, as investors frustratingly take aim at multi-million pound pay deals. Shareholders haven't shied away from calling for reform. For instance, the Investment Association proposed overhauling the standard pay mechanism for senior executives, the long-term incentive plan (LTIP), for fear it was failing to adequately link pay with performance.

Read more: FTSE 100 ranked on corporate governance

The BIS committee has only recently concluded its high-profile investigations into working practices at Sports Direct and the collapse of retailer BHS. Both shone a light on serious governance concerns at two of the most famous names on the high street.

Top institutional investors Legal and General (L&G) will also publish their plans to reform corporate governance tomorrow, following the Investment Association's own investigation over the summer. According to reports, L&G is expected to swing behind the growing pressure for listed companies to publish their pay ratios - the difference the earnings of the highest-paid member of staff and the average salary.

Prime minister May made corporate governance one of her first priorities among coming into office in July, as she mooted the idea of putting workers on boards and attacked "vested interests" across the UK corporate sector.

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