Businesses back May's tweaked approach to governance as green paper hints at fresh u-turns

Mark Sands
Follow Mark
Theresa May And Philip Hammond Visit Renishaw Innovation and Engineering Plant
May first mooted mandating workers on boards over the summer. (Source: Getty)

Businesses have welcomed new proposals on corporate governance which appear to show Theresa May continuing to tweak her stance on the sector.

The widely-trailed plans included proposals to make publicly-listed firms publish pay ratios, and introduce a form of representation on public boards.

But May had already backtracked on forcing firms to directly hand workers non-exec roles, suggesting instead the government would seek to make sure their voices were heard on remuneration committees.

Read More: Theresa May kicks off bid to slash top dog pay

And today’s green paper also reveals that plans for binding annual shareholder votes on pay could be limited to some elements of remuneration, such as bonuses, and only for firms that have previously met opposition.

Suggestions also include a new governance code for unlisted companies.

British Chambers of Commerce director-general Adam Marshal said: “It’s good to see ministers are listening to a wide variety of business views on the future of corporate governance in the UK, and considering a range of options.”

Read More: Executive pay is about to get a major shake-up

Institute of Directors director general Simon Walker added that reforms for public firms are likely a response to scandals at retailers like BHS and Sports Direct.

“There are around 2,500 private firms which employ at least 1,000 people, and the damage that occurs when they are poorly governed can be substantial, as we saw with the collapse of BHS,” Walker said.

Commenting specifically on powers for shareholders to review pay, PwC reward and employment partner Fiona Camenzuli added that current rules of binding and advisory votes are already sufficient.

Read More: Five evidence-based proposals to make sure executive pay benefits society

"Reform should be focussed on the small number of cases where companies either lose a vote or achieve consistently low levels of support," she said.

"We support an escalation approach where additional binding votes are introduced for companies either losing a vote or getting consistently low levels of support."

Related articles