For the first time the UK’s biggest companies will have to disclose and explain their top bosses pay and the gap between that and their average worker, every year.
The new regulations to improve transparency on executive pay came into force on January 1 2019 and the first statutory disclosures will be provided from the start of 2020.
The Department for Business, Energy & Industrial Strategy (BEIS) said the pay ratio regulations will apply to large UK listed companies with over 250 employees.
BEIS said the disclosures will make companies justify their pay for top bosses and account for how those salaries relate to wider employee pay.
In addition to the reporting of pay ratios, the new laws also require all large companies to report on how their directors take employee and other stakeholder interests into account. The new regulations will also require large private companies to report on their corporate governance arrangements.
Business Secretary Greg Clark said: “Britain has a well-deserved reputation as one of the most dependable and best places in the world to work, invest and do business and the vast majority of our biggest companies act responsibly, with good business practices.
“We do however understand the frustration of workers and shareholders when executive pay is out of step with performance and their concerns are not heard.”
He said the regulations will build on Britain’s reputation by increasing transparency and boosting accountability at the highest level - giving workers a stronger dialogue and voice in the boardroom and ensuring businesses are accountable for their executive pay.
Alongside the pay ratio reporting will be a new statutory duty on companies to set out the impact of share price growth on executive pay outcomes. BEIS said this will provide greater clarity and for shareholders about the impact that significant share price growth can have on executive pay outcomes and whether discretion has been exercised before pay awards are finalised.