The Government has announced a raft of new regulations which aim to hold businesses to account for the salaries they pay.
Under the new rules, listed companies will legally be required to annually publish and justify the pay difference between top-ranking executives and other staff.
Organisations will also have to set out how they are acting in the interests of employees and shareholders.
The measures follow the Government’s gender pay gap reporting scheme in 2016.
The new rules will dig deeper into corporate culture and ask big businesses to explain why a chief executive is paid the amount he or she is, as opposed to staff on the frontline.
Listed companies with 250 or more employees will have to disclose and explain this difference – known as pay ratios – once each year.
Business Secretary Greg Clark said: “One of Britain’s biggest assets in competing in the global economy is our deserved reputation for being a dependable and confident place in which to do business.
“Most of the UK’s largest companies get their business practices right but we understand the anger of workers and shareholders when bosses’ pay is out of step with company performance.
“Requiring large companies to publish their pay gaps will build on that reputation by improving transparency and boosting accountability at the highest levels, while helping build a fairer economy that works for everyone.”
The chief executive of the Investment Association (IA) Chris Cummings added: “The UK has a global reputation as a leader in corporate governance and we welcome today’s package of reforms as they focus on the long-term interest of all company stakeholders, including shareholders and employees.
“Investors are demanding greater director accountability and transparency on executive remuneration. Pay ratios will shine a spotlight on what executives are being paid compared with their workforce, and investors will expect Boards to articulate why the ratio is right for the company and how directors are fulfilling their duties.”
To read the full announcement, please click here.