EUROPE – A coalition of UK local authority funds has called on listed companies to begin publishing breakdowns of average employee and executive pay, and suggested that the pay ratio between highest and lowest salaries should be published.
The Local Authority Pension Fund Forum's (LAPFF) call for greater transparency and restraint on executive pay comes as the youth wing of Switzerland's social democratic party (SP) saw its call for a 1:12 salary ratio in companies rejected by parliamentarians.
The LAPFF argued that the current approach to remuneration was "broken" and called on investors to "tackle the scale and growth of pay", rather than focusing on the structure of packages.
A number of high-profile challenges over executive pay last year focused on executive bonuses and incentive schemes.
In a statement, it said: "The Forum believes the steady increase in executive rewards in recent years, despite flat or negative performance in many cases, has called into question the current approach adopted by many companies.
"As such, investors need to devote more attention to the scale and increase in rewards at the top."
The organisation questioned the use of so-called golden hallos and benchmarks to determine executive pay and called for transparency of pay ratios within companies.
In a document detailing its proposals, it said companies needed a "shared vision" for growth and success, collaborating with its employees.
"However, we are concerned the growing gap between pay at the top and everyone else can undermine morale and motivation in the workforce," it said.
"We do not advocate that companies set an upward limit on the ratio of executive pay to average employee pay, but the publication of these ratios on a yearly basis will make the remuneration committee more accountable for making appropriate pay distributions."
The LAPFF's criticism follows an open letter by the National Association of Pension Funds to FTSE 350 companies calling for the end of peer benchmarking on salaries.
The letter, sent at the beginning of March, also argued in favour of capping pay increases at inflation.
However, more radical pay proposals have been called for in Switzerland by the youth wing of SP.
In the wake of the recent plebiscite that saw the electorate sign off on proposals to introduce mandatory voting for pension funds, its proposal to cap executive pay at 12 times the lowest employees' pay was debated by parliamentarians, only for nearly two-thirds to dismiss the idea.
Whereas Swiss business association SGV said it welcomed the "clear rejection" of the initiative, the SP youth group said it demonstrated that parliamentarians backed managers who wanted to "viewed society as a self-service shop".
David Roth, president of Juso, added: "Ripping off at the cost of the general public must stop. This is only possible through the 1:12 initiative."
Similar proposals have more recently been adopted by the UK's TUC, which said it would argue in favour of a 20:1 ratio.