LONDON – Prime Minister Theresa May has been accused of watering down her policy for corporate reform after scrapping her proposal to put workers on company boards.
The prime minister said she wanted to see “changes in the way that big business is governed” in a speech launching her Conservative leadership campaign last year.
In policy proposals released on Tuesday, the government will announce plans to force listed companies to reveal the pay ratio between the chief executive and the average worker and create a public register to show companies that have significant shareholder opposition to executive wages.
However, the two most radical proposals put forward by May last year – putting workers on company boards and making companies hold annual votes on executive pay – have been dropped from the government’s plans.
Reacting to the news, the TUC’s general secretary Frances O’Grady said: “This is a far cry from Theresa May’s promise to crack down on corporate excess. It’s a feeble proposal, spelling business as usual for boardrooms across Britain.
“The prime minister’s pledge to put workers on company boards has been watered down beyond all recognition.”
Under the government’s plans, companies will be required to have a non-executive director on its board to represent employees or create an employee advisory council.
Liberal Democrat leader Vince Cable said: “There is no mention of making shareholder votes on executive pay more regular, as the Conservatives promised. The new corporate governance code for large private companies – such as BHS – is voluntary and therefore likely to have little effect. “The overblown rhetoric from Theresa May is completely at odds with the weakness of the new rules.”
Some business groups welcomed the nature of the reforms, including the Institute of Directors, which supports business leaders across the UK.
The director-general of the IoD Stephen Martin told the Financial Times that he welcomed the “pragmatic” and “sensible” approach by the government.
Martin said: “Companies will have to prepare themselves to explain how pay as a whole in their business operates, and why executives are worth their packages.”
Business Secretary Greg Clark, who is behind the new measures said: “Today’s reforms will build on our strong reputation and ensure our largest companies are more transparent and accountable to their employees and shareholders.”