Companies need to work harder to gain societies' trust-Rio chairman

LONDON, Dec (Shanghai: 600875.SS - news) 6 (Reuters) - Multinational companies need to do more to gain the trust of wider society, including better explaining why top executives are so highly rewarded in comparison to workers, the chairman of global miner Rio Tinto (Hanover: CRA1.HA - news) told British lawmakers.

"Big companies are going to have to work harder and harder to earn the respect and trust of the societies in which they operate," Jan du Plessis said on Tuesday.

"It's a big challenge we should take seriously, pay is an element of it."

Prime Minister Theresa May's government has set its sights on improving corporate behaviour and curbing excessive executive pay, issues it said contributed to the divisions in society reflected in June's vote to leave the European Union.

It started consulting last month on possible measures including requiring pay ratios between the top executives and the average worker to be published.

But it has watered down an earlier plan to have workers represented on company boards.

Du Plessis was asked by Parliament's business committee whether chief executives were seeking to out-do each other on pay, resulting in a ratcheting up of rewards.

"There sometimes could be an element of that," he said.

But he said Rio Tinto was competing in a global market for executive talent, shown by the number of its executives who were poached by competitors, and it needed to find the right people to handle the complexities of the business.

John Hood, chair of the compensation committee at advertising group WPP (Frankfurt: A1J2BZ - news) , told lawmakers the demands of shareholders on executive boards to drive shareholder returns were "intense".

WPP's chief executive Martin Sorrell received a 70 million pounds ($89 million) pay package last year, one of the biggest in British corporate history.

Hood said Sorrell's payment was linked to a long-term scheme based on growth targets that had been approved years earlier by shareholders.

"We're not playing flippantly with numbers, we are trying to design systems that best align the interests of the shareholders with the performance of the company, with the leadership qualities of the chief executive," he said.

"This is a very complex equation we are trying to solve."

Both executives were against publishing a ratio of average worker-to-CEO pay, saying that with many thousands of employees and contractors working in different markets around the world, such a comparison would make no sense.

($1 = 0.7833 pounds) (Reporting by Paul Sandle and Adela Suliman; Editing by Mark Potter)