British bosses forced to publish pay differences between executives and workers

London: Around 900 companies will be forced to publish the ratio between executive and worker pay in what Theresa May's government described as "world-leading" corporate pay reforms, but which fell short of the British prime minister's original pledge to also put workers on boards.

The British government said on Tuesday it would introduce new laws which would force listed companies to reveal the difference in pay between the salary of their average worker and that paid to their bosses, matching US law.

A name and shame register will also list the names of companies where a fifth of investors have objected to executive annual pay packages.

When Mrs May was campaigning for the Tory leadership she said: "If I'm prime minister ... we're going to have not just consumers represented on company boards, but workers as well."

But the pledged changes unveiled on Tuesday by her business secretary Greg Clark reveal she has ditched her plans to give shareholders binding votes on executive pay packets and place workers on boards.

Instead, improving worker representation at the decision-making level would include either: assigning a non-executive director to represent employees, create an employee advisory council or nominating a director from the workforce. Crucially these would be enforced under a "comply or explain" code, meaning they would not be mandatory.

"Today's reforms will build on our strong reputation and ensure our largest companies are more transparent and accountable to their employees and shareholders," said Mr Clark.

But the TUC, the peak body for Britain's unions said the changes were "feeble" and a "far cry" from the Tory leader's promise to crackdown on excessive corporate pay.

"It's a feeble proposal, spelling business as usual for board rooms across Britain," said general secretary Frances O'Grady.

"The prime minister's pledge to put workers on company boards has been watered down beyond all recognition. This now amounts to little more than a box-ticking exercise."

Stephen Martin from the Institute of Directors said pay ratios will sharpen awareness of the issue on boards but cautioned "they can be a crude measure."

"Companies will have to prepare themselves to explain how pay as a whole in their business operates, and why executives are worth their packages," he said.

The average British worker earns £28,200 ($45,790) per year compared to the average FTSE 100 CEO earning £5.48m or $8.9 million per year, according to the independent think tank High Pay Centre.

In 2016 Bloomberg ranked the US first and the UK third in the highest pay awarded to CEOs. Australia ranked 11th place.

Australia does not have executive-worker pay disclosure laws but does have a two-strikes rule enabling shareholders to force a spill of the board if they repeatedly reject proposed pay packets.

However this has not dampened calls to do more to tackle the issue of excessive corporate pay which is set against the broader backdrop of political inequality.

Just last week the chairman of Australia Post John Stanhope has halved the pay for the company's new CEO Christine Holgate after it was revealed the outgoing boss Ahmed Fahour will leave the job with a $10.97 million pay packet.

Writing in today's Financial Review KPMG partner Stephen Walmsley says boards recognise there is a real problem with the levels of executive pay.

"Unless corporate Australia can find a way of restraining executive pay, we can expect the pattern to be repeated here," he said.

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