Question to the Department for Business, Energy and Industrial Strategy:

To ask the Secretary of State for Business, Energy and Industrial Strategy, what steps he is taking to increase the involvement of company workforces in the development of remuneration packages.

The Government’s response to the Corporate Governance Reform green paper consultation, published on 29 August 2017, included a request to the Financial Reporting Council (FRC) to consult on a new responsibility for remuneration committees, under the UK Corporate Governance Code, to oversee pay and incentives across their company and engage with the workforce to explain how executive pay aligns with wider pay policy. The Government’s response also asked the FRC to consult on a new Code principle establishing the importance of strengthening the employee voice at board level and a provision requiring companies to adopt, on a “comply or explain” basis, one of three robust employee engagement mechanisms, including the option of a director from the workforce. The FRC has consulted on these and other proposed changes to the Code and will be publishing a revised Code later this year.

The Government’s green paper consultation received a number of responses on the specific issue of worker representation on remuneration committees. The Government’s response did not mandate worker representation on remuneration committees, but the proposed new requirements in the Code would ensure that employees’ views on pay and other issues help to inform the decision-making of remuneration committees and the company board more generally.

Additionally, the Government will shortly be bringing forward to Parliament draft secondary legislation that will require companies to disclose and explain annually the ratio of CEO remuneration at quoted companies to the average remuneration of their UK employees.