Tory manifesto: Conservatives to force companies to declare corporate pay ratios

'The public is rightly affronted by the remuneration of some corporate leaders,' according to the manifesto

Senior corporate pay has risen much far faster than corporate performance in recent years (Getty)

The Conservative party intends to introduce rules under which companies must publish pay ratios, in a bid to crack down on lofty executive pay, according to the party’s election manifesto.

“We believe that people should be rewarded for their talents and efforts but the public is rightly affronted by the remuneration of some corporate leaders,” the manifesto reads.

It goes on to say that senior corporate pay has risen far faster than corporate performance and that the gap between those paid most and those paid least has grown from a ratio of 47 to one in 1998 to 128 to one in 2015.

“The next Conservative government will legislate to make executive pay packages subject to stricter annual votes by shareholders and listed companies will have to publish the ratio of executive pay to broader workforce pay,” the manifesto says.

It adds that companies will have to do more to explain their pay policies - particularly complex incentive schemes - more clearly.

The party also said that it would commission an examination into the use of the share buy-backs, to stop them from being used "artificially to hit performance targets and inflate executive pay".

Despite widespread public outrage at bumper pay packets, executive pay is still normally waved through at annual general meetings and earlier this month the Institute of Directors urged whatever government is voted in on 8 June to give investors more power to crack down on bumper pay.

The organisation, which represents approximately 30,000 business leaders, at the time urged the new government to adopt a rule which would force stock-market listed firms to give shareholders a second vote if a large proportion rejects the company’s proposed pay report.

Under that proposal, if at least 30 per cent of investors oppose the remuneration report at the annual meeting, the company would have to reconsider their pay policy and give shareholders another vote.

According to data published by the Equality Trust earlier this year, bosses of the UK’s biggest 100 companies take home an average of £5.3m each year, which is 386 times higher than what a worker earning the national living wage pockets.

In its manifesto, the Conservative party also says that it intends to change the law to ensure boards of companies act in the interest of employees, suppliers and the wider community, and not just shareholders.

Listed companies will be required either to nominate a director from the workforce, to create a "formal employee advisory council" or to assign specific responsibilities relating to employee representation to a designated non-executive director.

Subject to what the party calls "sensible safeguards", it also intends to introduce a right to request information relating to the future direction of the company for employees.