Executive pay is now so high that there is no 'credible link' between pay and performance

LONDON — Executive pay is now so high that it is “impossible to see a credible link between remuneration and performance,” according to a group of MPs.

A report published in Wednesday by the Business, Energy, and Industrial Committee calls on firms to tie pay more closely to performance, and to introduce the annual publication of pay ratios to address a “worrying lack of trust” among the public.

A report published by the Equality Trust in March found that FTSE 100 CEOs now earn an average of £5.3 million each year, 386 times that of a worker earning the National Living Wage, and the ratio is growing.

Committee chairman Iain Wright, Labour MP for Hartlepool, said that recent governance scandals at retailers Sports Direct and BHS had also demonstrated the need for reform.

Wright said: “A worrying lack of trust in business by the general public has been fuelled by recent high-profile examples of bad practice, as well as pay levels being ratcheted up to levels so high that it is impossible to see a credible link between remuneration and performance.

“In this context, these developments demand that our existing framework be improved to keep the UK in the lead globally on corporate governance,” he added.

The report also recommends measures to boost the diversity of boards, including ethnic and gender diversity targets, and the introduction of workers on boards.

Prime Minister Theresa May announced her intention to place workers on boards in July last year as she became prime minister, but later abandoned the plan after a backlash from industry figures.

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