A NEW quango should be set up to “police pay codes in UK companies”, the final report of the High Pay Commission proposed yesterday.
The government’s business secretary Vince Cable welcomed the findings, saying: “Many of the options we are consulting on are reflected in the report.
“There is widespread consensus, not just among the public but in the business community, that this [high executive pay] is unacceptable and is undermining the credibility of our markets-based system,” added Cable, who was consulted by the Commission during its work.
The Commission pointed to spikes in executive pay at FTSE 100 companies and called for greater transparency on remuneration at the top. Its report cited lead executive pay at Barclays and Lloyds, which totalled just £87,323 and £79,344 respectively in 1979, yet now exceed £4.3m and £2.5m.
“Excessive high pay damages companies, is bad for our economy and has negative impacts on society as a whole,” the report said, proposing that the government “establish a permanent body to monitor high pay”.
“Fairness is a concept close to the heart of the British people and it is essential that we now redress the balance,” said Deborah Hargreaves, chair of the Commission.
“Ministers and politicians have spouted much rhetoric about fairness,” she added. “We are calling on them to take this agenda forward.”
The Commission, set up in November last year, was formed by the Labour-associated activist group Compass, and funded by the Joseph Rowntree Charitable Trust.
AT A GLANCE: COMMISSION REPORT
● EXECUTIVE SALARY
•Executives should be paid a basic salary with only one performance-related bonus if deemed necessary, the report said.
•Top executive salaries should be published, including non-board members.
•Companies should publish how remuneration was accounted for and voted on, the report claimed.
•The Commission wants employees to be represented on remuneration committees.
•The report says all services of remuneration consultants should be published to stop cross selling, which is a conflict of interest.
•Shareholders should also have a greater say in the pay of executives to increase accountability, the report shows.
● ENSURING FAIRNESS
•To show the difference between the median paid and top paid employees, companies need to publish fair pay reports. The report said this would encourage fairness.
•A permanent body should be set up to monitor the pay and income distribution within the company, guarantee transparency and report to government and public on executives’ pay.