By Charles Cotton, Senior Adviser for Performance and Reward, CIPD

CEO pay has been in the spotlight for some time now, but 2020 could be the year that businesses truly wake up to their responsibility to ensure that people throughout their workforce are paid fairly and appropriately for their contribution to organisational success – and maybe even start to change their view of what success looks like.  

Whether you work in the public or private sector, for a small or large organisation, new corporate reporting requirements – concerning not just CEO pay, but corporate culture and employee voice too – are good news for people professionals across the economy. If businesses take them seriously, the people profession will be in hot demand to gather and analyse the data needed for annual reports in the first instance and, longer-term, provide solutions to fix any problems identified.  Ultimately, it’ll make all our organisations better places to work for everyone.  

What are the reporting rules on culture and employee voice? 

The UK Corporate Governance Code asks company boards to pay greater regard to corporate culture and how they preserve value over the long-term.  It also asks them to describe, in their annual reports, how they have considered the interests of stakeholders, including the workforce, when performing their board duties. All firms with more than 250 UK employees must include a statement summarising how the directors have engaged with employees and taken their views into account when making decisions that impact them. 

What do people professionals need to know about CEO pay ratio reporting rules? 

As a people professional, your interest in the debate about executive pay likely depends on the size and type of organisation you work for.  But whether the rules apply to your business or not, CEO pay ratio reporting will bring both risk and opportunity to you and your employer. The risk is that the increased transparency will raise more questions than ever about CEO pay – the more your staff hear about CEO pay in the media, the more questions they’ll have about what their CEO gets paid, and why. But with that comes the opportunity to address unfairness in your organisation and push people-related priorities higher up the business agenda.  

If you work for a publicly listed company with more than 250 employees, you need to swot up on new CEO pay ratio reporting requirements to ensure your employer is complying with the law and reaping the opportunity to improve pay practices and build trust with employees, customers and shareholders. Read our factsheet for guidance on what the requirements entail and HR teams’ role in helping businesses comply.   

Five ways in which new company reporting rules could boost your career 

1. Get your employee voice strategy off the ground 

If you’ve struggled until now to get senior-level buy-in for your employee voice strategy, highlighting the Corporate Governance Code requirements around employee engagement could be your key to success.  

To grasp this opportunity, consider the following:  

• Highlight the positive: it’s an opportunity to improve the employee experience by asking for their feedback and using this insight to create a great workplace 

• Emphasise the pros and cons: senior leadership teams rarely see things solely in terms of black and white, so you could call attention to both the positives and negatives in your talks with senior managers. 
• Underline that it’s the right thing to do: even if there were no regulatory requirements or positive business impacts, shouldn’t your organisation endeavour to be the best it can be by giving voice to its employees? 
• Scare tactics: if all else fails, encourage senior managers to consider how will it look if their firm doesn’t comply. How will  customers, investors, employees and the media react? And what will happen if they’re asked to justify their inaction to the regulator or to politicians? 

Learn more about employee voice and employee engagement.  

2. Beat your employee engagement targets and improve employee relations within your workforce 

Excessive pay gaps are a huge source of distrust and disengagement. Greater transparency and fairness around pay, coupled with more opportunities for people to make their voice heard, will help you build greater trust among your workforce, ultimately helping you reap all the benefits of an engaged workforce.  

To grasp this opportunity, try asking questions such as:  

• Is our CEO’s pay package good value for money, considering his or her contribution to success?  
• Are we paying people at the other end of our pay scale a liveable wage? If people are struggling financially, they won’t be fully engaged at work and one in four employees report that money worries affect their ability to do their job.  
• Are people working on the right things, in the right way, at the right times? By examining the design of your organisation, its jobs and work, you could help improve your firm’s productivity and ability to increase pay for everyone.  

• Do people in your organisation understand the rewards on offer or what they need to do to get those rewards? Improved communication could be an easy way to increase employee satisfaction, while keeping staff in the dark can fuel perceptions of unfairness.  

3. Make organisational culture a strategic priority by identifying opportunities to improve business productivity  

The UK Corporate Governance Code asks companies to pay greater regard to corporate culture and how they preserve value over the long-term. Find out who’s writing your annual report and help them describe how your organisation’s culture is (or isn’t!) aligned with the company purpose and business strategy, and the steps your company is taking to ‘promote integrity and value diversity’. 

Scrutinising CEO pay could also help you to identify and address underlying cultural issues that could be thwarting performance. Research from Nesta found that executive pay systems were discouraging innovation because the focus on short-term financial measures means businesses are less likely to invest in R&D or workforce training.   

To grasp this opportunity, consider the following:   

• How is your CEO encouraged and incentivised (through his or her pay package) to ensure that people in the organisation are managed, developed and rewarded in a way that supports your firm’s principles and values?  
• Are the firm’s principles and values reflected in the way in which everyone is rewarded and recognised? What sort of behaviours do the various benefits (both financial and non-financial) on offer encourage?   
• Once changes have been made, put measures in place to regularly evaluate how people are being paid to ensure that the pay processes and outcomes are still fair.  

4. Increase your influence by showing your board how greater investment in L&D, succession planning and performance management will benefit your business.  

New CEO pay reporting requirements will force businesses to take a long hard look at the quality of leadership in their organisations and the value for money they’re getting from their Key Management Personnel. It’ll also force them to look at how the performance of the rest of the workforce is managed and rewarded – and ensure that people throughout the organisation know what they need to do to increase their earning potential. All this will make your performance management and L&D strategies difficult for senior leaders to ignore.    

To grasp this opportunity, consider these ideas:  

• Get buy-in for a leadership development programme by showing your board how succession planning could reduce the need to pay over the odds to bring in a so-called ‘superstar’ CEO from outside the company.  Research has shown CEOs promoted from within are paid 20% less than those hired externally.  
• Make sure everyone in your organisation knows why they’re paid what they’re paid, and what they need to do progress their careers and get a pay rise. 61% of workers say their line manager has never explained what they need to do to get a pay rise.   

• Start challenging the assumption that corporate success is down to the success of a handful of leaders at the top of the organisation. Once your employer recognises that success is a collective endeavour, everyone will benefit – not just in terms of fairer reward, but in terms of improved business outcomes because, once the business knows what drives success, it will make better-informed business decisions and investments.   

5, Get full business buy-in for your health and well-being projects  

Greater scrutiny over how and why CEOs are paid, coupled with rising expectations around responsible and sustainable business, could eventually lead to new measures of business performance that will see CEOs incentivised to invest in things like L&D and the well-being of their workforces. If your employer currently only pays lip-service to health and well-being initiatives, this is bound to make them take it more seriously – and the benefits will speak for themselves.  

To grasp this opportunity, try collecting data and insights to show your senior leaders, boards and investors a different view of ‘success’. For example, rather than looking at financial performance alone, look at other measures of success such as customer satisfaction, employee well-being, workforce engagement and retention rates, or even measures of societal and environmental impact. You can then highlight any areas of dissonance that could pose a risk to the company’s reputation or long-term potential for growth and success – and show them how investing in things like health and well-being could help mitigate those risks.