Several constituents have contacted me recently about the Government’s plans on corporate governance reform, and I do appreciate the concerns that have been raised in relation to executive pay in particular.

Previous reforms introduced by the Government in 2013 have gone some way to strengthening and increasing transparency in the UK executive pay framework - in particular the requirement to gain shareholder approval for executive pay policies every three years, and the need to disclose the pay of each director as a single figure. However, I appreciate that executive pay has continued to be a key factor in public dissatisfaction with large businesses, and a source of frustration to UK investors.

That is why further action is now being taken which will address concerns that a minority of companies are not responding adequately when they encounter significant shareholder opposition to levels of executive pay.

The new measures aim to improve the transparency of big business to shareholders, employees and the public, with a large focus on tackling abuses and excesses in the boardroom, specifically that of executive pay. They include:

  • The world’s first public register of listed companies where 20 per cent or more of their shareholders have objected to executive annual pay packages. This new scheme will be set up in the autumn and will be overseen by the Investment Association - a trade body that represents UK investment managers.

  • Requiring listed companies to annually publish and justify the pay ratio between CEOs and their average UK worker.

  • Ensuring remuneration committees do more to engage with the workforce to explain how pay at the top relates to wider company pay policy.

  • Ensuring employees’ interests are better represented at board level of listed companies by asking the Financial Reporting Council, which sets high standards of governance through the UK Corporate Governance Code, to introduce a new requirement in the code to achieve this.

The Financial Reporting Council has also been asked to revise the UK Corporate Governance Code to extend the recommended minimum vesting and post-vesting holding period for executive share awards from three to five years to encourage companies to focus on longer-term outcomes in setting pay.

I understand that further action will be considered in the future, unless there is clear evidence that companies are actively taking steps to respond to shareholders’ concerns about executive pay.