“The committee’s report makes clear that transparency is the best route to making organisations accountable and driving positive change, which chimes with what the CIPD has long argued in relation to corporate governance.
“We especially welcome the recognition that the committee has given to human capital reporting. Business leaders have often talked about people being their most important asset, but up to now there has not been enough emphasis on ensuring that organisations actually report on their people in terms of how they invest in and manage them for the long-term.
“Improving the quality of reporting, as the committee recommends, will encourage organisations to recognise fully the contribution of all their people, not just the few at the top. It’s hard to justify very high pay for executives if it is unconnected to the organisation’s culture, including the contribution and performance of the wider workforce and how they are rewarded.
“The specific recommendations on executive pay are also very welcome, with the committee recognising the value that pay ratios will bring to the debate on executive remuneration. Organisations should not be afraid of open conversations about executive pay and ensuring rewards are appropriately aligned with people’s contribution across the business and pay ratios will help to underpin those discussions. This is a win-win for business, as CIPD research shows that disproportionate levels of CEO pay is a huge issue for employees, with 59% saying that the high levels of executive remuneration demotivates them at work.
“Alongside the recommendation to place employee representatives on remuneration committees, pay ratios will help build greater transparency over executive salaries and bonuses, and should encourage organisations to ensure there is a clearer link between overall top pay levels, organisational performance and the rewards of the wider workforce.”
