CIPD joins High Pay Centre to advocate ethical executive pay
The professional body for HR and people development and the think-tank respond to the government’s green paper on corporate governance with a call for a “major rethink.”
Recommendations in response to the green paper
The coalition is therefore making a number of recommendations in its response to the consultation. It is also calling for a major re-think of corporate governance to improve CEO pay transparency and ensure boards recognise their broader responsibility towards the workforce when decisions on executive pay and business investment are made. These include that all publicly listed companies should be required to:- publish the ratio between the pay of their CEO and median pay in their organisation
- have at least one employee representative on their remuneration committee
- establish a stand-alone human capital development sub-committee, chaired by the HR director, with the same standing as all board sub-committees.
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Brexit offers opportunity to implement change?
Commenting on the CIPD’s joint response, CIPD chief executive Peter Cheese says he believes Brexit offers the right moment to build trust and sustainable businesses. “This green paper provides an opportunity to think differently about how UK plc can lead the way in post Brexit Britain. Current levels of executive pay undermine both trust and sustainability. Fiddling around the edges of the current system won’t provide the solutions we need for an innovative, productive and leading economy.“We are encouraged by and supportive of the recent announcement by the FRC [Financial Reporting Council] of the need for a wider review of corporate governance codes to better reflect modern business realities.“Let’s create a new system, where decisions about executive pay are taken within a different context, one which places the firm’s human capital development – or workforce – at the heart of Board decision making."Reconnecting pay, performance, people and value creation
“In our view it’s very hard to justify very high pay for executives if it is unconnected to the organisation’s culture and the rewards, contribution and performance of the wider workforce,' continued Mr Cheese. "Consequently, many businesses need to fundamentally rethink how they create value for the long-term, recognising fully the contribution of all their people, not just the few at the top.“Currently, too many organisations are run with a singular focus on their financial stakeholders which undervalues the human capital – the people – that deliver business success. Our recommendations are designed to redress the balance and ensure more employers actually live-up to the routinely spouted cliché that people are their greatest asset.”Stefan Stern adds: “Twenty-five years after Sir Adrian Cadbury first reported on reforms to corporate governance it is surely time to take the bolder action that is needed. A healthier regime on top pay could have many positive consequences for UK businesses and for society generally. This could be the boost that 'Brexit Britain' needs."For more of the latest HR news and features, visit Re:locate's human resources section.
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