MPs put renewed focus on gender pay gap and executive remuneration

The House of Commons Business, Energy & Industrial Strategy (BEIS) select committee said it was looking at the issues in the context of concerns about the overall level of executive pay and bonuses.

The announcement comes less than a fortnight before the deadline for companies with more than 250 employees to file data on their gender pay gaps. To date, less than half the organisations required to produce data have made the disclosure.

The BEIS committee inquiry will look at issues around compliance of businesses with reporting requirements, including whether the regulations properly capture staff salaries, as well as the steps companies are taking to address pay gaps.

Gender pay expert Helen Corden of Pinsent Masons, the law firm behind Out-Law.com, said the inquiry was timely.

“It’s positive because we want to make sure that the regulations are as effective as they can be. It can only be a good thing that the regulations and their effectiveness are being looked at and the ways in which they can be improved are considered,” Corden said.

Corden said there was inconsistency in what companies have chosen to voluntarily report over and above the strict legal requirements. She said some companies that were part of one group were only reporting separately, while other group companies were also providing consolidated gender gap figures.

In the professional services sector, including law firms, many organisations had not included partner remuneration as this is not required under the requirements. However some firms, including Pinsent Masons, had chosen to disclose partner remuneration figures too.

“It would be good if there was some analysis of what companies have published over and above the strict legal requirements to see if the regulations should be amended to incorporate this,” Corden said.

Pinsent Masons remuneration expert Suzannah Crookes said: “This inquiry is a clear signal that the government is continuing to monitor executive pay and to ensure that previous recommendations have not only been appropriately implemented but also that they are having the intended impact on behaviours.”

“Revisions to the UK Corporate Governance Code are intended to apply to accounting periods beginning on or after 1 January 2019, so it appears that the government is keen to understand the progress made through response to its previous recommendations prior to change to the Code coming into effect," she said.

“The government has previously indicated that if its recommendations did not result in appropriate change, then further measures may be required, and the responses to this inquiry may play a key role in informing government views on what, if any, further action is required," said Crookes.

The deadline for companies to report their gender pay gap is 4 April, before the close of evidence for the BEIS committee inquiry. Although the committee said it would look at the effectiveness of sanctions for non-compliance, Corden said it was still unclear what those sanctions would look like.

Meanwhile the inquiry will also examine the implementation of prime minister Theresa May’s promise to crack down on excessive executive pay.

This aspect of the inquiry will follow up on an April 2017 committee report which made recommendations on executive pay and corporate governance.

MPs will look at the progress made in simplifying the structure of executive pay and pay reporting, and the role of remuneration committees, institutional investors and shareholders in curbing excessive pay.

BEIS committee chair Rachel Reeves said: "Excessive executive pay and gaps in gender pay are at root an issue of fairness. Pay awards for top bosses which vastly outstrip worker pay and which owe little to building genuine long-term value in a company are impossible to justify and damage the social contract between business and the public.”

Currently the inquiry has scheduled two evidence hearings in April and May and written evidence must be submitted by 10 April on gender pay and 8 May for executive pay issues.