A committee of MPs have urged Prime Minister Theresa May to take action on excessive levels of executive pay, after concerns that it is contributing to eroding public trust in business.
The Business, Energy and Industrial Strategy select committee has called for a crackdown on “excessive” remuneration, as part of its wider review into corporate governance. In particular, the committee highlighted a flaw in that soaring levels of pay for senior staff no longer demonstrated a correlation with performances.
Committee chairman Iain Wright said: “Executive pay has been ratcheted up so high that it is impossible to see a credible link between remuneration and performance.
“Pay must be reformed and simplified to incentivise decision-making for the long term success of the business and to pursue wider company objectives than share value.”
The widening gulf between executive and employee pay has become particularly stark in recent years, as wage levels continue to stagnate despite rising levels of inflation. In spite of stunted wages, UK unemployment levels have remained encouraging, continuing at 11-year low of 4.8 percent as of February ONS figures.
As of recently, the Business, Energy and Industry select committee has had a primary role in investigating the collapse of BHS and Sir Philip Green’s failure to safeguard pensions for its now redundant employees. The scandal has proved especially damaging to Sir Green’s public image, with many calling upon the revoking of his knighthood.
“The collapse of BHS highlighted the flaws in damage which private companies can do,” said Mr Wright.
“The UK corporate governance system is recognized throughout the world as of high quality.
“However, recent scandals and the issue of executive pay have undermined public trust in corporate culture.
“That, together with rising stakeholder expectations, changing business models and technology, means that corporate governance needs to evolve to provide assurance to investors and wider society.”
Whilst the global financial crisis has continued to shine a light on corporate greed, public disillusionment with politics and MPs remains. Residual distrust in politics has continued to be fuelled by the 2011 MPs expenses scandal and the more recent revelations regarding peers exploiting attendance loopholes in order to claim their wages.
Despite the committee’s most recent intervention into tackling inequality at the corporate workplace, politicians remain one the public’s most mistrusted professions, presenting a serious impediment to the quality of British politics and public participation.