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[LONDON] British businesses should overhaul executive pay and scrap long-term incentive plans to rebuild public trust in corporate culture following recent scandals, a committee of lawmakers said on Wednesday.
Companies should publish pay ratios annually and workers should be represented on remuneration committees, parliament's Business, Energy and Industrial Strategy (BEIS) Committee said in a report.
Executive pay is a hot political topic in Britain after Prime Minister Theresa May campaigned to help those who voted for Brexit in protest at "out of touch" elites.
Corporate scandals - exemplified by the recent collapse of store chain BHS, sold to a serial bankrupt with no retail experience - have fuelled mistrust of company bosses, during a period of mediocre wage growth for most Britons. "Successful, productive and profitable companies cannot be disconnected from society," said Iain Wright, chair of the BEIS committee.
"Executive pay has been ratcheted up so high that it is impossible to see a credible link between remuneration and performance."
Shareholder revolts over pay have been commonplace this year.
On Monday, Sky News reported that BP Plc agreed to cut about 5 million pounds (S$7 million) from chief executive Bob Dudley's maximum pay for the next three years in a bid to ease shareholder unrest, citing people briefed on the matter.
And last week Reckitt Benckiser said boss Rakesh Kapoor, one of Britain's highest-earning CEOs, saw his 2016 pay package fall by more than a third following a safety scandal in South Korea that dented the consumer goods maker's performance.
The committee singled out long-term incentive plans for company bosses as lacking in transparency. "Pay must be reformed and simplified to incentivise decision-making for the long term success of the business and to pursue wider company objectives than share value," Mr Wright said.
Responding to the report, the Confederation of British Industry agreed long-term incentive plans could be too complex, but said banning them outright would limit flexibility for companies to reward executives.