(Bloomberg) --
The U.K. should put an absolute cap on executives' pay awards to averting embarrassingly high payouts, such as in the case of the homebuilder Persimmon, a panel of lawmakers said.
“Eye-watering and unjustified CEO pay packages are corrosive of trust in business and threaten to undermine the public's support for the way our economy operates,” Rachel Reeves, chair of the Business, Energy and Industrial Strategy Committee, said in a report on Tuesday. She said a “roll-call” of “dishonorable” pay decisions at top British firms “tells the all too familiar tale of corporate greed which is so damaging to the reputation of business in our country.”
Persimmon paid out a total of 444 million pounds ($585 million) to executives as a result of having an uncapped incentive plan. The builder acknowledged in a statement that an incentive plan, which began in 2012 and ended last year, failed to set a cap on payments. Its current remuneration committee “fully understands the need for pay restraint,” it said.
The lawmakers' report recommends that companies do more to link top bosses' pay to that of the rest of the workforce. The report notes that over the past decade, chief executives' earnings in the FTSE 100 have increased four times as much as national average earnings.
The committee recommended businesses should make greater use of profit-sharing schemes, and that companies should be required to appoint at least one employee representative to their remuneration committee.
To contact the reporter on this story: David Hellier in London at dhellier@bloomberg.net
To contact the editors responsible for this story: Aaron Kirchfeld at akirchfeld@bloomberg.net, Alex Morales, Stuart Biggs
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