Disclosures will make UK companies justify their pay for top bosses
Pay ratio regulations will apply to large UK listed companies with over 250 employees and the first statutory disclosures will be provided from the start of 2020.
Disclosures will make companies justify their pay for top bosses and account for how those salaries relate to wider employee pay.
New regulations coming into force today (Tuesday 1 January 2019) mean that, for the first time, the UK’s biggest companies will have to disclose and explain every year their top bosses pay and the gap between that and their average worker.
The pay ratio regulations will make it a statutory requirement for UK listed companies with more than 250 employees to disclose annually the ratio of their CEO’s pay to the median, lower quartile and upper quartile pay of their UK employees. Companies will start reporting this in 2020 (covering CEO and employee pay awarded in 2019).
In addition to the reporting of pay ratios, the new laws also require all large companies to report on how their directors take employee and other stakeholder interests into account and require large private companies to report on their corporate governance arrangements.
These reforms are part of the government’s action to upgrade our leading corporate governance and business environment to ensure the UK remains a world leading place to work, invest and grow a business.
Reforms follow support and calls from investors and shareholders for companies to do more to explain how pay in the boardroom aligns with wider company pay and reward. The pay ratios regulations will hold Britain’s largest businesses to account for excessive salaries, while recent changes to the corporate governance code give employees a greater voice in the boardroom. ■