The next government should give investors more say over executive pay packets to try and rebuild trust in big businesses, the Institute of Directors has urged.
The Institute called for directors’ pay to be re-examined if 30 per cent of shareholders reject the pay proposal, giving investors the chance to vote again.
Under current rules, remuneration schemes must be rethought if 51 per cent of shareholders reject the pay proposal.
Despite a series of high profile rebellions in recent months, future executive pay policy is normally waved through at annual general meetings.
According to the Institute, only 3 per cent of FTSE 100 companies suffered a majority vote against their top executives pay packets in 2016.
Oliver Parry, head of corporate governance at the Institute, said there is the “pressing need” to rebuild public trust in businesses.
He also said companies need to work in the long-term interests of investors and employees, rather than the short-term interests of managers.
"Now is the time for sensible reforms which increase transparency and draw more engagement from shareholders," he added.
Last month, MPs said it was worrying that levels of trust in British businesses was lower than in many other countries.
Iain Wright, who chairs the House of Commons business, energy and industrial strategy committee, said recent scandals and the “dramatic ratcheting up” of executive pay packets have undermined public trust.
This comes despite the UK generally having a good reputation for corporate governance.
Earlier this year, accounting watchdog the Financial Reporting Council launched a review of the corporate governance code to encourage companies to adopt tighter controls when it comes to the pay packets of their top bosses.
katherine.denham@ft.com
