Three New Year’s resolutions to level the playing field on pay

ACCA (Association of Chartered Certified Accountants)

ACCA (the Association of Chartered Certified Accountants) has released three New Year’s resolutions to level the playing field on pay to coincide with the day on which, according to the National Pay Centre, average earnings of FTSE 100 CEOs will surpass what the average UK worker will earn during the whole of the year.

Link pay to long-term company performance. Directors have a duty to ensure the sustainable stewardship of the companies they manage – long-term company performance should be the yardstick against which they are remunerated.

Align pay at the top and the bottom. Where sustainable targets have been met, companies should also consider how those at the lower end of the pay scale can be rewarded for their contribution. Solutions might include limiting executive pay to a specific multiple of average pay across the organisation and introducing wider incentives and benefits to reward effective performance at all levels.

Publish clear company policy on pay and performance as part of a wider commitment to transparent corporate culture. How companies communicate their remuneration policy is arguably as important as the actual remuneration levels and companies should ensure that their disclosures around pay are easily understandable. Government should also be emphasising the importance of transparency and accountability within the current reporting frameworks.

Commenting on the National Pay Centre findings, ACCA head of corporate governance Jo Iwasaki said: “Business leaders have an opportunity to set a new tone from the top at the beginning of 2017. By adopting these resolutions, business leaders can help move UK corporate culture on to a more transparent and sustainable footing.

“ACCA research has previously found that our members rank ‘tone at the top’ as having the strongest influence on corporate culture in an organisation.”