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13 July 2016 • Articles

More accountability expected from with Theresa May’s corporate governance reforms, Financial Directors - UK

Theresa May's Corporate Governance reforms in UK

According to Reza Eftekhari, Director of the UK market for Sodali, incoming prime minister Theresa May’s announcement to reform corporate governance procedures would be a positive step if they lead to more accountability and better transparency. While companies currently only conduct binding votes on their overall remuneration policies every three years, the proposed measures include the introduction of annual binding votes on both the pay policy and packages of company directors.

The proposed changes announced by the former home secretary make sense and could be a positive move, creating better dialogue between executives and investors; and the power of investors to have a say would almost certainly increase.

However, these moves alone may not be enough to narrow the pay gap between executives and their employees. For the pay gap that exists to be diminished even further, there would need to be real cultural and structural changes required within companies. At a board level, this would include engaging with investors proactively and adopting more responsible policies in terms of linking pay packages to performance. The balance must be right – still appealing to the most talented prospects, but having a more responsible structure in place where policies are also socially acceptable.

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