Fat Cat Pay Shake-Up To Empower Shareholders

Two top City figures have added their support to proposals aimed at curbing excessive rewards for executives through greater powers for shareholders.

The plan, drawn up by Tory MP Chris Philp, also calls for greater transparency on rewards in the wake of Prime Minister Theresa May's stated ambition to introduce greater controls on boardroom greed.

High Pay Centre research released last month showed FTSE 100 chief executives earned 140 times their employees' average earnings in 2015 - with bosses' incomes growing 10%.

Mr Philp's proposals include the introduction of a Swedish-style Shareholder Committee - comprising the five biggest investors in a publicly-listed company to control executive salary levels.

Such committees would also have the power to hire and fire directors with wider shareholder votes on company pay reports being binding.

Companies would also be forced to publish the ratio between chief executive remuneration and the salary of the
average worker.

There have been a number of high profile shareholder revolts on pay this year - with BP forced on the defensive after losing a vote on its pay report for 2015 - a decision that was non-binding.

Sky News recently revealed talks between BP and its top investors to formulate a new pay policy and that the company had ditched its long-standing adviser on executive pay.

Mr Philp said his plans would help tackle the problem of "ownerless corporations".

They have attracted support from celebrated fund manager Neil Woodford and former City minister and chairman of Marks & Spencer (Other OTC: MAKSF - news) , Lord Myners.

Mr Woodford has scrapped bonuses in favour of flat salaries at his own firm to help tackle short-termism.

But head of sustainable investment at Royal London Asset Management, Mike Fox, said that while reforms were needed the approach in Mr Philp's report was wrong.

He said: "We believe that imposing an annual binding vote could be detrimental, forcing shareholders to focus on shorter performance periods when evaluating whether performance has merited the remuneration paid to senior executives (Other OTC: UBGXF - news) ."