Theresa May accused of backtracking on boardroom excess

Prime Minister Theresa May has been accused by Labour and trade unions of "watering down" plans to tackle corporate excess.

But Downing Street said Mrs May had been "consistent" in her approach.

Under government reforms, the UK's biggest firms will have to reveal how much more their chief executives are paid compared with the average worker.

Companies will also be encouraged to represent workers' voices on boards.

Unions attacked the plans, saying they were "feeble", and Labour said the prime minister had backtracked on promises.

However, a Downing Street spokeswoman said Mrs May "wants to improve workers' representation and that's going to be achieved with part of this report, which is about changes to the corporate governance code."

"From her perspective, her position has been consistent and has not changed," the spokeswoman added.

The government has released measures aimed at increasing boardroom transparency in publicly listed companies.

Business Secretary Greg Clark said the changes would make firms "more accountable to their employees and shareholders".

The new corporate governance laws, which are due to come into effect by June 2018, will force some 900 publicly listed companies to reveal the pay ratio between bosses and workers.

Bosses of the UK's 100 biggest listed firms earned £4.5m on average last year, and typically took home 129 times more than the average employee at those firms.

The Conservatives had promised in their manifesto that executive pay should be approved by an annual vote of shareholders.

However, the new measures instead propose that those public companies who face a shareholder revolt on pay will be named on a register overseen by the Investment Association.

BBC business editor Simon Jack said the government had watered down plans in the face of business lobbying, but also pragmatic and legal problems.

At the weekend, Theresa May attacked firms who hand bosses excessive pay "as the unacceptable face of capitalism".

Writing in the Mail on Sunday, she said the excesses of some chief executives was "damaging the social fabric of our country".

Businesses will also have to ensure that staff of listed companies are better represented at board level, either by allowing workers to nominate a director, creating an employee advisory council or assigning a non-executive director to represent the workforce.

This requirement will be included in the UK Corporate Governance Code, which operates on a "comply or explain" basis.

Mrs May had initially promised to force companies to have an employee representative on the board, during her bid to become Conservative Party leader last July.

However, she backtracked in November and said businesses would not be mandated to implement the move.

Labour accused the government of "watering down" an original promise to increase workers' voice to a lone representative on the board of directors or a separate employee advisory council.

"Each of these will be easily outvoted or ignored," said Rebecca Long-Bailey, Labour's shadow business secretary.

TUC general secretary Frances O'Grady said the government's reforms were "feeble".

"Just a year ago the prime minister repeatedly promised fundamental reform of business and that's because there was real public concern about boardroom greed, about tax avoidance and exploitative work practices," she told the BBC.

"I am afraid that the government has bottled it in the face of business lobbying and that doesn't bode well for really tackling some of these big problems," she added.

Vince Cable, leader of the Liberal Democrats, said: "The overblown rhetoric from Theresa May is completely at odds with the weakness of the new rules."

While the majority of the new measures will only apply to publicly-listed companies, the government has asked the Financial Reporting Council, the City watchdog, to draw up a voluntary set of corporate governance principles for large private companies.

It follows the collapse of BHS last year which left 11,000 people out of a job and the company's pension schemes in a perilous state.

The department store chain was sold by Sir Philip Green to a former bankrupt, Dominic Chappell, for £1 in 2015.

Commenting of the corporate governance reforms, Paul Drechsler, president of the CBI business lobby group, said: "Companies take this seriously and look forward to working closely with the government to ensure the UK maintains its reputation as a global leader in this field and as a primary location for international investment.

"The CBI is very clear that the unacceptable behaviour of a few firms does not reflect the high standards and responsible behaviour of the vast majority of companies."

It is no surprise that today's package of reforms to the way Britain's companies are run has fallen short of the crackdown on fat cat behaviour promised by Theresa May last year.

The watering-down can has been used liberally since she initially promised workers on boards and binding shareholder votes on executive pay.

The size of the climbdown is arguably as much to do with the scale of the original ambition as with the feebleness of the final proposals.

The Tory attempt to shake up the way corporate Britain is run hit several obstacles.

Lobbying by the business community was to be expected, but there are some pragmatic and legal problems as well.

Read Simon's blog here.