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Repairing UK’s broken executive pay system

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Reacting to the Government’s announcement on executive pay and corporate governance, Charles Cotton, Pay and Reward Adviser at the CIPD, the professional body for HR and people development.

The publication of pay ratios is a welcome first step in addressing the broken system of executive pay. Alongside the presence of employees on remuneration committees, they 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.

This is not about naming and shaming companies, but instead encouraging open conversations about what’s being rewarded and recognised at each grade, how, when and why. 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 percent of employees citing it as a reason why they are demotivated at work.

It is however disappointing that the Prime Minister has backtracked on her commitment to put workers on executive boards without a proper review. This could have been a further step in bringing greater levels of accountability and scrutiny, and helped bridge the gap between those at the top of organisations and their workforces.

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