Executive pay has grown to almost 180 times that of the average worker, from 60 times, since the 1990s, according to a report by British think tank the High Pay Centre.
The U.K. government needs to take more radical action to tackle the inequality gap by forcing firms to cap executive pay at a fixed multiple of their lowest paid employee, the High Pay Centre said in a report published Monday titled 'Reform Agenda: How to make top pay fairer'.
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"It's time to get serious about tackling the executive pay racket. The government's tinkering won't bring about a proper change in the U.K.'s pay culture," said High Pay Centre director Deborah Hargreaves.
"We need to build an economy where people are paid fair and sensible amounts of money for the work that they do and the incomes of the super-rich aren't racing away from everybody else," she added.
The report comes after 52 percent of shareholders in British fashion house Burberry last week voted not to support its remuneration report - a rare stand against excessively high salaries. The firm's chief executive Christopher Bailey has a package worth up to £10 million a year.
In October, regulations were introduced in the U.K. to force listed firms to give shareholders a binding vote on directors' pay. Now over 50 percent of shareholders must approve a policy before it is passed.
However, since rule changes were enforced, every vote at a FTSE 100 company has seen the majority of shareholders support the company policy on top pay, with the recent case of Burberry proving the exception.
The High Pay Centre argues that the perception of an executive elite reaping all the rewards from economic growth is damaging trust in business, and widening inequality could trigger political and economic stability.
A poll conducted by the think tank found that 78 percent of the British public would support the proposed cap on chief executive pay, while 13 percent opposed the idea.
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The think tank also noted that different ratios could be applied to different sectors, based on the advice of businesses, employees and academic experts.
U.K. retailer John Lewis and British bank TSB have already adopted a 75:1 maximum pay ratio between the highest and lowest earners.
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Other proposals included in the report were: increased representation for workers on company boards and the remuneration committees that set executive pay, as well as on city pay regulators; a national inequality target; and compulsory profit sharing, meaning if a company does well ordinary workers also receive a windfall.
The average pay packet for chief executives at FTSE 100 companies climbed to £4.7 million in 2013, from £4.1 million in 2012, the report said.
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