Executive pay to be investigated by MPs

The Business, Innovation and Skills Committee has recently held inquiries into BHS and Sports Direct, reports The BBC.

The investment arm of insurer Legal and General has also warned Britain’s top companies to curb executive pay.

It said that significant shareholder opposition “should not be ignored”.

Companies should take note if more than 20 per cent of shareholders voted against a pay deal, Legal and General said.

It comes after the Prime Minister recently pledged to overhaul the way businesses are run.

Committee chair Iain Wright said the parliamentary inquiry needed to look “at the laws that govern business and how they are enforced”.

BP, WPP and Smith and Nephew have been among the big companies where investors have revolted against boardroom pay.

In April, 59 per cent of BP shareholders voted against a 20 per cent pay rise for chief executive Bob Dudley, worth £14m.

However, that vote was not binding and Mr Dudley received the rise despite BP’s falling profits.

Under current rules shareholder votes are only binding every three years and, at BP, the next binding vote is in 2017.

Earlier this year, WPP chief executive Sir Martin Sorrell was forced to defend his pay package, worth up to £70m.

He said his pay was based on the performance of WPP, the world’s largest advertising group.

On Friday, Legal and General Investment Management, (LGIM) which manages £853bn in assets wrote to Britain’s top 350 firms warning that they must take note of the increasing unease about large bonuses and pay.

LGIM wrote that it would like to “encourage” firms to reduce short-term annual bonuses.

It said they should consider the wider impact when awarding executive pay, including the effect on the workforce and public perception as well as taking into account the economic climate.

In 2013, amid growing investor unhappiness over excessive pay, the government gave shareholders a binding vote every three years on a firm’s pay policy.

LGIM has timed its letter to influence firms as they plan new policies to run from 2017.