Outgoing Institute of Directors boss Simon Walker is to warn that employers should not try to fight Theresa May's plans to clamp down on executive salaries.
Business secretary Greg Clark will formally launch a government paper on corporate governance tomorrow, with proposals expected to include a requirement for large, public firms to publish pay ratios between median salaries and that of their chief executives.
While the IoD has long fought against ratios as a blunt instrument, Walker will tonight tell an audience at the High Pay Centre that business should not close ranks and fight plans for reform.
“Although CEOs harrumphed over policies like the minimum wage, the message was clear that business and government shared common goals, and could talk to each other,” Walker is expected to say.
“After Brexit and Trump, business should expect a new level of scrutiny and questioning of their role in society. It would be foolish now for companies to close ranks and defend the high pay status quo.
“How they react on that issue may prove to be the litmus test for the relationship between business and government over the next few, rather bumpy, years.”
The government is also expected to require new, binding annual votes on pay deals, a move that Walker will say reflects the failure of businesses to strike the right tone on listening to their investors over bonuses.
“We must constantly refresh our instructions to listed companies to make sure they are not only competitive, but also maintain an open and innovative economy which works for employees and consumers.
“Have we got the balance of shareholder power right? In the area of executive pay, I don’t think we have,” he will say.
It comes ahead of Walker's departure from the IoD in the new year. Having served as director general since 2011, he will move into government to serve as a non-executive at Liam Fox's department for international trade.