The inquiry followed on from the failings highlighted by their inquiries into BHS and Sports Direct, and in the wake of commitments from Theresa May to overhaul corporate governance.
As part of their evidence gathering Tom Gosling, PwC’s UK Reward practice leader, was asked to give evidence relating to executive pay at a BEIS select committee hearing.
Below you’ll find a summary of the key recommendations:
Executive pay is, unfortunately, complicated. Pay plans operate over different time periods and are influenced by a range of performance factors. Tom talked to the Select Committee about the link between pay and performance as well as whether the rise is in executive pay has contributed to short-termism.
Tom’s key recommendations to the committee were fourfold:
To address the question of pay fairness and differentials, Tom recommended
broadening the role of the remuneration committee as set out in the UK Corporate Governance Code
a requirement to publish a Fair Pay Report (see example below)
ensuring meaningful engagement takes place with employees
broader Government moves to increase stakeholder voice
quantitative disclosures should focus on changes in pay relativities over time rather than on a pay ratio
To address the question of short-termism, the recommendations were
to re-draft the executive pay section of the UK Corporate Governance Code to encourage the concept that long-term share awards can, in the right circumstances, be a legitimate alternative to target-driven plans
Disclosure rules should be updated to enable a complete view of incentives and the pay-for-performance relationship
The BEIS committee published its report into Corporate Governance on 5 April, (see our summary below), saying British businesses must act on corporate governance, executive pay including long-term incentive plans, and boardroom diversity to maintain the country's strong international standing in corporate governance and address a worrying lack of trust of business among the public. The recommendations will be read by the government who may decide to incorporate some of these into policy or legislation.