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GOVERNANCE

PLSA calls for stronger governance disclosures at U.K. companies

The Pensions and Lifetime Savings Association is calling for changes to existing corporate governance policies for U.K. companies, including the disclosure of pay ratios between CEOs and employees.The PLSA was responding to a paper by the Department for Business, Energy and Industrial Strategy making a number of proposals related to executive pay, stakeholder representation and the governance of private companies.

In its response, the PLSA noted that “several corporate governance scandals have hit U.K. companies in recent years, and throughout this time U.K. executives have continued to receive excessive pay awards.”

The association's members represent £1 trillion ($1.25 trillion) of assets. “As long-term investors in these companies, our members are concerned about the potential damage to stakeholder relationships, as well as the lack of sustainable growth caused by the widening gap between executives and ordinary workers.”

The PLSA is calling for raising the threshold for annual general meeting votes on pay awards to pass to a “super majority.” The PLSA suggests 75% as an example. Any company that fails to achieve this level of agreement should be required to put their pay policy to a further, binding vote, the PLSA said.

The PLSA said pay ratios between the CEO and U.K. employees at different pay levels throughout the organization should be disclosed. “This provides a useful insight into the culture and business model of a company,” said the PLSA.

Further, the PLSA has called for the introduction of stakeholder panels or committees, with a requirement to monitor the company's impact on and relationship with its stakeholder communities. The association said this could provide a company's board with a “valuable insight into the shop floor of their organization.”

The PLSA's response to the paper is available on its website.