The UK is “years away” from legislating on company executives’ pay, according to former pensions minister Steve Webb – despite the prospect being raised by Theresa May at the weekend.
Writing in The Guardian on Saturday, in the wake of the Carillion collapse, the prime minister suggested the government would set out “tough new rules for executives who try to line their own pockets by putting their workers’ pensions at risk”.
Webb, who is now director of policy at Royal London, welcomed the government’s criticism of firms that paid “excessive” bonuses, but argued legislative change was still some distance away.
“The government is right to criticise firms that pay excessive bonuses or put large dividends ahead of plugging the hole in the company pension fund,” he said. “But they will find it difficult to convert this concern into workable policies and there is no ‘silver bullet’ solution.
“Every company is different and a dividend payout that looks excessive at one firm may be quite sustainable at another. Despite all the concern about the BHS case, nothing has so far changed and we are probably years away from new legislation coming into force.”
May said that, by January 2019, all listed companies would have to reveal the pay ratio between bosses and workers. “Companies will also have to explain how they take into account their employees’ interests at board level, giving unscrupulous employers nowhere to hide”, she added.
Additionally, the prime minister said businesses would have to demonstrate they have taken into account the long-term consequences of their decisions.
Webb suggested the government could consider allowing executive bonuses to be clawed back by liquidators in the event of a corporate failure, and could give regulators power to challenge firms that ask for excessive periods to pay off pension deficits while paying out large dividends or bonuses.
He also suggested the government could allow regulators to block takeovers where it is thought these could reduce the chance of pension promises being kept.
Following the collapse of facilities management and construction giant Carillion last week, it was revealed some executives at the company had been paid more than £1m in salaries and bonuses while the firm’s debts increased.
As the firm is now in liquidation, some 28,500 defined benefit scheme members now face entering the Pension Protection Fund, costing the fund around £900m.