Government has announced that it will bring forward proposals to ‘get tough’ on excessive boardroom pay next month. Deputy Prime Minister Nick Clegg has called private sector pay rewards “unjustified and irresponsible”, indicating that the Government may introduce new legislation if necessary.

Paul Fontes, partner at international law firm Eversheds, comments: “The increased transparency of executive pay over recent years has had the unintended effect of causing significant increases in remuneration at a time when the salary of the average worker has stagnated and as a result, executive remuneration has become a highly political issue.

To date the Conservative party had been resistant to calls from the Liberal Democrats within the government to legislate in this area. However, the perceived failure of institutional investors to control executive remuneration seems now to have caused a change in thinking. It will be interesting to see how any proposed legislation is framed. With many FTSE 100 companies now doing most of their business overseas and under an increased burden of regulation, any legislation will need to strike a balance between curbing the worst excesses and not being so unpalatable that leading UK companies are driven to relocate.”