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Time for pay ratios?

29 April 2016

One of the UK’s biggest investment institutions, Legal & General, has called for pay ratios to be mandatory for UK listed companies.

Legal & General’s Sacha Sadan said that reporting ratios was becoming compulsory in the US in 2018 under Securities & Exchange Commission rules. He felt this can only add to pressure on companies everywhere to follow suit.

Pay differentials between the boardroom and workers have rocked in recent years. It was recently reported that FTSE 100 CEO’s pay in 2014 was 183 times workers’ average pay, up from 160 in 2010.

Meanwhile, Labour’s shadow chancellor, John McDonnell, has written to the Times demanding that companies allow their lowest-paid employees to help to set their executive salaries. He pointed to an academic study, which found that the more the CEO was paid the worse a company performed over the next three years. He explained that the High Pay Centre had called remuneration committees as “the last closed shop”. He wants to end the remuneration racket and break up the old boys’ network.

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