Bosses fight wage gap disclosure

TOP companies are coming under strong pressure from leading institutional shareholders to disclose the growing pay gap between executives and their employees.

The powerful National Association of Pension Funds, whose members speak for more than a fifth of investments in the stock market, wants the information to appear in company annual reports.

At present, remuneration committees, which set boardroom pay, have to be 'sensitive' to pay and employment conditions across a company, especially when deciding salary increases.

But the NAPF proposals go much further, even urging companies to spell out policy on pay differentials.

The NAPF move reflects concern among some institutional investors that the widening pay gap between boardroom and shopfloor is divisive and demoralising. That in turn can damage corporate performance.

Chief executives of blue-chip companies earn an average salary of £579,000 - 28 times more than the average UK worker. But this compares favourably with America, where the ratio is about 400 times. In Germany and Japan, the multiple is only ten times.

Not surprisingly, big companies are resisting the NAPF's demands. Sean O'Hare, head of executive compensation at accountancy giant KPMG, said: 'This is an unreasonable and inappropriate request. Nevertheless, many unions and employees have difficulty understanding why they are restricted to a 3% pay rise while executives enjoy a 9% increase.'

The average pay for chief executives of FTSE 100 companies does not stop at £579,000. If bonuses and incentives such as share options are included that figure balloons to £2.6m.

It is these figures that the NAPF is keen to see revealed in full - and how they compare with the rest of the workforce.