Prime Minister Theresa May promised to clamp down on executive pay, give workers a say on strategy and make it harder for foreign firms to take over British ones, as she set out pre-election plans to give the state more influence over corporate Britain.
May’s Conservatives have for decades encouraged a low-key approach to corporate regulation, but the prime minister said trust in Britain’s biggest companies had been damaged by soaring executive pay and several mismanaged takeovers.
“We do not believe in untrammelled free markets,” the party said in its manifesto for the June 8 national election, which surveys suggest it is on course to win by a landslide.
“We will set rules for businesses that inspire the confidence of workers and investors alike.”
The world’s fifth largest economy has attracted more foreign investment than any other country in Europe, playing major roles in sectors from banks to transport, energy, telecoms and retail.
Under May’s plans – set out as she negotiates a divorce from the European Union that could change the face of the $2.6 trillion economy – executive pay packages would be subject to strict annual shareholder votes and listed companies would have to publish the ratio of executive to average pay.
In Britain, the heads of the biggest companies earn around 400 times more than a worker on the minimum wage.
“The public is rightly affronted by the remuneration of some corporate leaders,” the Conservatives said on Thursday.
In a bid to seek greater protection for British jobs when companies are sold, May said her party would tighten the rules around takeovers, particularly in infrastructure deals where a foreign owner could raise security concerns.
Any promises made during takeovers would be legally binding, and the government would gain the power to pause the process to allow greater scrutiny.
WARNING AGAINST PROTECTIONISM
May, who became prime minister after Britain voted to leave the EU last June, faced one of her first major challenges when she gave the go-ahead for a $24 billion plan for a Chinese-backed nuclear power plant in southwest England.
She ultimately approved the deal but said her government would take a more cautious approach over similar foreign investments in the future.
The prime minister has also indicated prior to taking the top job she wanted increased power to scrutinise takeovers after Kraft’s (KHC.O) purchase of Cadbury led to job losses.
A recent failed attempt by Kraft to buy Unilever (ULVR.L) prompted the head of the Anglo-Dutch firm to urge the government to ensure a level playing field for target companies.
“Governments cannot use public money to prop up failing businesses but they also cannot allow people and their communities to be cast aside.”
Investors and analysts cautiously welcomed May’s efforts to strengthen the interests of investors, employees and customers, but warned against any move towards protectionism.
“Any nationalist agenda aimed at restricting ownership or transfer of ownership is clearly negative for markets and will make it harder for UK firms to achieve the valuations they deserve,” said Gianluca Ferrari, analyst and portfolio manager at Shareholder Value Management.
Companies may also be concerned at May having portrayed Britain’s vote to leave the EU as a cry for a crackdown on immigration, and she has said that firms hiring migrant workers must pay an additional levy.