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A New Labor Goal for the CEO-Worker Pay Gap

Research & Commentary
March 30, 2013


Britain’s top unions will soon be flexing their shareholder muscles — and insisting that the corporations where their pension funds have investments start taking significant steps to narrow the pay divide between executives and workers.

Trades Union Congress leader Frances O'Grady

Trades Union Congress leader Frances O’Grady

How wide a gap between CEO and worker pay can a rational society accept? The British labor movement last week delivered an answer: No corporations should be paying their top executives over 20 times what they pay their workers.

From now on, the UK Trades Union Congress announced last week, Britain’s leading unions will be voting the shares their pension funds hold in UK corporations — currently worth over $1.5 billion — against any corporate pay plans that top this 20-to-1 ratio.

“We are going to use the power of our pension funds,” vows Trades Union Congress general secretary Frances O’Grady, “to make a difference.”

In the UK, starting later this year, corporate boards will have to gain shareholder approval for their executive pay plans.

British unions will apply the 20-to-1 ratio at first to the gap between executive and average or median worker pay. They hope eventually to apply the ratio to the gap that divides top executives and their company’s lowest-paid workers.

The Trades Union Congress, the UK national labor federation, spells out this approach in detailed new guidelines that will govern how unions vote their share holdings — on everything from compensation to executive hiring practices — at Britain’s 350 largest corporations.

“As union investors,” the new guidelines pronounce, “we support the creation of a more equal society and are committed to taking the impact on wider inequality into account in our consideration of executive pay.”

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