Executive pay is about to get a major shake-up

Lynsey Barber
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The Chancellor Of The Exchequer Delivers His First Autumn Statement
Theresa May's planning changes to corporate governance rules (Source: Getty)

The difference between how much the average worker and their bosses get paid could soon be revealed under new proposals by the government due to be unveiled this week.

Prime Minister Theresa May is pushing for reform of executive pay in a year where shareholders of several of the UK's biggest firms have become more outspoken over the rising remuneration packages of top bosses.

Read more: Firms back May's attack on executive pay

May promised to tackle corporate governance during her bid to become leader, but has since rowed back on one aspect of those plans, last week telling the CBI annual conference that she will not go ahead with plans to put workers on boards.

But, a green paper is expected to be published this week outlining several other proposals, including pay ratios between chief executive pay and the salaries of average employees.

It is also thought that remuneration committees will be handed greater responsibility for consulting shareholders and the rest of the company on pay, while binding shareholder votes will be introduced.

The crackdown has been met with a mixed response from business.

The investment association earlier this year called for a pay shake-up while the plans had overwhelming support from the majority of firms, an exclusive poll for CIty A.M. found.

However, some experts have warned that the plans could backfire.

Read more: Executive pay regulation will backfire if it’s not based on evidence

A report on Friday ahead of the green paper from think tank Big Innovation Centre, representing views from top companies, business schools, consultancies and the Bank of England, was supportive of reform generally.

However, they warned two of the proposals - binding shareholder votes on pay and the publication of pay ratios - would hold business back from hiring talented chief executives.