Question

To ask Her Majesty’s Government what consideration they have given to requiring all listed companies to report annually on the ratio between the pay of chief executives and the median pay of workers in that company.

The Government introduced new laws comprehensively reforming the governance and reporting of company directors’ pay in October 2013. Quoted companies are now required to report the ratio of average percentage change in employee pay compared with the percentage change in the chief executive’s pay.

The Government consulted extensively on the details of the new requirements, and decided not to mandate publication of the ratio between the chief executive’s pay and average employee’s pay.

The Government welcomes transparency on remuneration, but believes that an explicit focus on this ratio could have negative unintended consequences. For example, it could incentivise companies to outsource jobs to agencies or overseas, or to employ more of the workforce on a part-time basis, in order to manipulate ratios.