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Firms must explain executive pay

Large construction firms will have to disclose and explain how the pay of their chief executive relates to others in the company.

New regulations, which come into force today, mean listed companies with more than 250 employees must disclose the ratio of their CEO’s pay to the median, lower quartile and upper quartile pay of their UK employees.

They will also have to publish a statement explaining the gap.

“[The] disclosures will make companies justify their pay for top bosses and account for how those salaries relate to wider employee pay,” a statement from the Department for Business, Energy and Industrial Strategy said.

The new laws also require large companies to report on how their directors take employee and other stakeholder interests into account. They also require large private companies to report on their corporate governance arrangements.

Disclosures under the new regulations will begin in 2020.

Business secretary Greg Clark (pictured) said: “The regulations coming into force today will build on our reputation by increasing transparency and boosting accountability at the highest level – giving workers a stronger dialogue and voice in the boardroom and ensuring businesses are accountable for their executive pay.”

Wates chairman James Wates led a review of corporate governance principles designed to help large companies meet their new reporting requirements.

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