Draft Companies (Miscellaneous Reporting) Regulations 2018

Debate between Michael Fabricant and Andrew Griffiths

Wednesday 4th July 2018 General Committees

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Andrew Griffiths)]

I beg to move,

That the Committee has considered the draft Companies (Miscellaneous Reporting) Regulations 2018.

It is a pleasure to serve under your chairmanship, Mr Sharma, even in this somewhat sticky weather.

The UK has an international reputation for the strength of its corporate governance framework, which gives us a competitive advantage and is important in making the UK an attractive place to work, invest and do business. One of the reasons we have maintained that reputation is that we have kept our corporate governance framework up to date by conducting reviews and making improvements from time to time.

In that spirit, in November 2016 the Government published a Green Paper on corporate governance reform, which focused on ways to improve shareholder scrutiny of executive pay and strengthen boardroom engagement with employees, customers, suppliers and other stakeholders; it also looked at the case for strengthening corporate governance in large privately held businesses. The backdrop to the Green Paper was public disquiet about high executive pay, which over the past two decades has grown much faster than pay generally. The largest increases occurred between 1998 and 2011—they have now stabilised—when mean pay of FTSE 100 chief executive officers rose from £1 million to £4.5 million.

[Michael Fabricant (Lichfield) (Con)]

Is my hon. Friend aware that John Lewis Partnership plc has an arrangement in its trust deed that no one can earn more than 75 times the lowest paid person in that company? Although that ratio may not be appropriate for FTSE companies, does he not think there is merit in having that type of maximum pay range?

[Andrew Griffiths]

I thank my hon. Friend and constituency neighbour for raising that point. The John Lewis Partnership is an exemplar of the way businesses should deliver corporate governance. It has a well-earned reputation for doing the right thing. Although it would be wrong of us to be prescriptive about pay ratios, sunlight is the best antiseptic, and this kind of transparency will change behaviour.