Businesses in the UK should create a link between executive and workforce pay, MPs have said.
With the average FTSE 100 chief executive now earning £4 million a year while the rest of the workforce earning less than £30,000, the Business Select Committee has warned the pay gap is rapidly becoming a symbol of "corporate greed", which it says is undermining business in the UK.
While average earnings have barely grown compared with inflation over the past decade, the UK's top executives have seen their pay packages increase dramatically.
The committee of MPs also criticised incentive-based packages and blamed remuneration committees for "ever more complicated and opaque pay packages". A number of companies and packages were highlighted as part of the criticism, most notably Jeff Fairbairn, former CEO of Persimmon. In 2017, he was awarded a £75m bonus but soon resigned after public backlash.
However, it did praise shareholders at a number of companies for preventing such moves. It highlighted Royal Mail, wherein 2018 70% of shareholders voted against giving new boss Rico Back a £5.8m welcome bonus.
Labour MP Rachel Reeves, who chaired the committee, said: "These examples... highlight the persistence of executive pay policies where far too little weight is given to delivering genuine long-term value, investing in the future, or ensuring rewards are shared with workers.
"When the company does well, it is workers and not just the chief executive who should share the profits. Why should chief executives have a more generous pension scheme than those who work for them?"
In January, measures were introduced to force any company with more than 250 employees to publish its pay gap between top bosses and the rest of the workforce. However, the committee is recommending a number of changes to help reduce the back. It wants organisations to create a quantifiable link between executive and workforce pay. It has also called for a cap on total remuneration packages and for at least one member of the workforce to be placed on remuneration committees. And businesses should make greater use of profit-share schemes, the committee said.
