The MP-led Business, Innovation and Skills Committee has announced an inquiry into corporate governance.
This follows inquiries into the sale and acquisition of BHS and the working practices of Sports Direct that both exposed significant corporate governance failures.
Ian Wright, the chair of the Committee, said “Irresponsible business behaviour and poor corporate governance ill serves workers, but it also tarnishes the reputation of business and undermines public trust in enterprise. We need to look again at the laws that govern business and how they are enforced”.
Executive pay will be one of the areas that the Committee will be exploring in the inquiry. It is an area that has remained in the spotlight over the last few months, with numerous cases of shareholder revolts over high executive pay packages being splashed across the newspapers. In recent days, the Office of National Statistics revealed that record bonus payments were been paid out. In the 12 months leading up to the end of March 2016, bonus payments totalled a staggering £44.3 billion, which represents an increase of 4.4% from the previous financial year. The Committee is keen to investigate the factors affecting the rise in executive pay; whether executive pay should take account of companies’ long-term performance; whether a greater role should be given to shareholders in setting pay and whether the government should control or influence executive pay.
As part of the inquiry, the Committee will also examine directors’ duties and the composition of boards. In particular, it will look into whether there are better ways to scrutinise board decisions; whether extra duties should be imposed on companies to encourage more transparency; how more diversity in boards could be achieved and whether there should be worker representation in boards.