Labour Market

Resisting pressure to intervene in executive pay, a sensible decision

Len Shackleton responds to government comments on executive pay

As the government responded to the Business, Energy and Industrial Strategy Committee’s report on executive and high pay, Professor Len Shackleton, Editorial and Academic Fellow at the Institute of Economic Affairs said:

“The Government has sensibly resisted pressure from the Business, Energy and Industrial Strategy Committee to make further interventions in the determination of executive pay. In particular, while saying that it maintains a watching brief and may return to legislation in the future, it does not accept the need for employee representation on remuneration committees, or to extend the publication of pay ratios to large private companies, or to insist on abandoning LTIPs and capping similar performance-related schemes which have boosted the pay of some top executives.

“Corporate governance has been interfered with far too frequently over the last 25 years, with little positive to show for it. Increasing restrictions on the arrangements for governing listed companies and demands for more and more published information have led to a fall in new IPOs and a reversion to private equity or overseas listing.

“Concern over executive pay was a hobby-horse of Mrs May, who initially wanted to go much further than the BEIS Committee, and our next Prime Minster should be more sceptical of populist demands for government to control top pay. There is no evidence that arbitrarily cutting executive pay or imposing employees on remuneration committees would improve company performance, or that it would benefit lower-paid workers in any meaningful way.”

Notes to editors:

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To download the most recent IEA book on the executive pay, click here.

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