Bonuses and bosses' pay to come under MP scrutiny


MPs have launched a wide-ranging inquiry into executive pay and corporate governance amid growing anger at large payouts and high profile scandals at BHS and Sports Direct.

Led by the Business, Innovation and Skills (BIS) Committee, the probe will also focus on directors' duties and the composition of boardrooms, including worker representation and gender balance in executive positions.

MP Iain Wright, chair of the BIS Committee, said: "Irresponsible business behaviour and poor corporate governance certainly act against the interests of workers, but they also act as a brake on long-term prosperity and profitability in companies, as well as tarnishing the reputation of business and undermining public trust in enterprise.

"We need to look again at the laws that govern business and how they are enforced."

Corporate responsibility has emerged as a key theme in Prime Minister Theresa May's rhetoric since she came to office.

The scope of the inquiry will include examining whether executive pay should take into account long-term company performance and if top bosses' pay should "reflect the value added by executives relative to junior employees".

It will also ask if company law is sufficiently clear on the role of directors and non-executive directors, explore what more should be done to increase the number of women in executive positions and examine proposals for worker representation on boards and remuneration committees.

The inquiry comes after a summer of corporate scandals that saw tycoons Sir Philip Green and Mike Ashley lambasted by MPs as part of inquiries into the collapse of BHS and working conditions at Sports Direct respectively. 

It also follows a round of shareholder revolts at annual general meetings (AGM) this year, as investors took umbrage with the remuneration awards dolled out to top bosses, with firms such as Anglo American and BP facing protests at their AGMs.

Mr Wright added: "While there has been some recent shareholder actions against these ever larger pay packages, can we have any confidence that the current framework for controlling pay is working?

"As a Committee, we will want to look at whether executive pay should take account of companies' long-term performance and whether the Government should intervene further to control executive pay."

Simon Walker, director general of the Institute of Directors, said that the reputation of corporate Britain "has not recovered from the financial crisis".

He added: "There are important questions that need to be addressed on issues including transparency, executive pay and board diversity. The Prime Minister has made clear that company boards are in her sights, so directors must fully engage in this debate."