Croydon South MP Chris Philp shows red card to CEOs with ‘Premier League wages’ and demands accountability

Businesses bosses benefitting from ‘Premier League football-style wage inflation’ should be more answerable to shareholders according to Croydon South MP Chris Philp, who will present the issue to the PM today.

In his paper, Restoring Responsible Ownership, Mr Philp documents the huge rise in executive pay over the last ten years, with top FTSE 100 CEOs now earning 150 times the average worker’s wage.

Working with the High Pay Centre, Mr Philp outlined to the public yesterday his solution to the situation as a response to growing public discontent.

He said: “Public opinion on this topic has hardened in the past few years.

“It becomes hard for the elected officials to do nothing when public opinion is so strong.”

Mr Philp’s study cites a poll showing that 71% of the public believe that CEO pay is too high.

It also notes that CEO pay has a slight negative correlation with company performance and that, on average, the best-paid CEOs work at poorer-performing corporations.

To counter this, Mr Philp suggested that shareholders play a greater role in governing the company.

“For capitalism as a system to work, you need the owners of corporations to be listened to,” he said.

“I believe that for free markets to work, the shareholders need to be in charge.”

Though Mr Philp said parliament should not take an active role in controlling corporations, his three-point plan proposes policies to hold boards more accountable to their shareholders.

The first two points – to make public companies publish data on CEO pay and for shareholders to have a yearly vote on bonuses – have already been adopted by government.

However, Mr Philp noted that, as in the case of BP earlier this year where the 59% of shareholders who voted against the CEOs’ £14m remuneration package were ignored, boards are not always answerable to shareholders.

Lord Myners, who provided an introduction to the paper, commented on the current lack of communication and accountability between board members and shareholders.

He said: “How much worse does it have to get before we begin to ask what is the correct relationship between them?”

Regarding wage increases, he added: “It’s not the number, it’s the culture, the message.”

The paper’s third point seeks to address this problem by introducing a shareholder committee which would play an active role in corporate governance.

Mr Philp recommends that the top five shareholders are made part of a committee which can question boardroom decisions, recommend the appointment of directors and directly ratify CEO pay packages before they are discussed at company AGMs.

These changes would increase the power of shareholders within corporations and, theoretically, make performance a higher priority than pay.

The paper received praise from Neil Woodford, head of investment at Woodford Investment Management, who described it as an important step in creating a more long-term and thoughtful form of corporate governance.

Critics have raised issues with the fact that other the opinions of other stakeholders in corporations, such as workers themselves, may fall by the wayside.

However, as Theresa May’s government has already implemented two of the points raised in the study independently, Mr Philp was confident that his proposition would be heard favourably.

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