The UK’s biggest law firms may eventually be asked to reveal the pay gap between their biggest earners and other members of staff, under new measures set out by the government.
The government said today that the UK’s biggest companies will have to reveal how much their chief executives are paid compared with 'the average worker'.
As it stands, this proposal applies to only publicly listed companies but the government has also asked City watchdog the Financial Reporting Council to draw up a voluntary set of principles for privately held businesses.
In a document published today, the government said it would ask the FRC to develop a ’voluntary set of corporate governance principles’ for large private companies and introduce secondary legislation to require companies of a significant size to disclose their corporate governance arrangements in their directors’ report and on their website.
’This requirement will apply to all companies of a significant size unless they are subject to an existing corporate governance reporting requirement. The government will also consider extending a similar requirement to limited liability partnerships of equivalent scale,’ it said.
A government spokesperson told the Gazette that law firms would be encouraged to sign up to the code. It is understood that the code will apply to all UK-headquartered companies that have more than 1,000 employees.
Paul George, the FRC’s executive director for corporate governance, said it would be down to the government to decide which entities would be encouraged to sign up to the code. ‘In many large private companies the managers are also the owners. Irrespective of who owns a company, this is about large employers recognising their responsibilities. Large law firms may wish to consider this,’ he added.
Chief executive Stephen Haddrill added: ‘Large private companies are integral to the UK economy as significant employers and supporters of communities and families. It is right that we develop a set of corporate governance principles to enhance confidence that they act in the public interest.’
Today’s proposals follow a manifesto pledge by the Conservatives to ensure that executive pay is approved by an annual vote of shareholders. Although the proposals do not go that far, they do also say that those companies who face a shareholder revolt on pay-gaps will be named on a register.