Theresa May has been forced to abandon her flagship plan to reform executive pay, prompting relief among business leaders but criticism from unions and Labour MPs.
The Prime Minister had previously vowed to return the Tories to its roots as the party of workers by clamping down on excessive executive pay and giving shareholders more power in the boardroom. However the policy, unveiled on Tuesday, is far weaker than originally proposed, following a backlash from companies over how tough new rules would affect recruitment and competition, reports The Telegraph.
Philip Hammond, the Chancellor, is also understood to have expressed concerns about the original pledge to force companies to disclose the highest levels of pay and justify them next to the lowest in their organisation. He is understood to have questioned how pay restraint could be implemented, as well as the need for workers on boards. Greg Clark, the Business Secretary, was also understood to have warned Mrs May against the original proposals.
Jacob Rees-Mogg MP, the Conservative backbencher, said last night: “I think this reflects the reality of a minority government, I am broadly supportive of the Government’s position.
“The Conservative party believes in free markets and the competition that engenders but it does not support oligopolies that distort the market and disadvantage consumers.”
Under the plans, the Investment Association will maintain a public register of listed companies where more than 20pc of shareholders oppose executive pay awards, alongside a record of the companies’ plans to address those concerns. At listed companies, executives will only be able to access their share awards after five years, extending the current three-year vesting period, in an effort to focus bosses’ minds on the long term.
Adam Marshall, director general at the British Chambers of Commerce, commented: “Far-reaching new regulation and compulsion could have a chilling effect on investment in the UK … but doing nothing is not a viable political option.”.
Rachel Reeves MP, the chair of the Business, Energy and Industrial Strategy committee, criticised the new legislation’s watered down measures, claiming “the Government has shied away from this tough approach and in doing so makes business as usual the easy option for business executives, rather than reform to tackle the excess and greed that holds back our economy and pay for everyone else”.