The UK government's 12-week consultation on corporate reporting, launched as part of the Starmer administration's deregulation drive, risks entrenching neoliberalism rather than ending it, according to a Guardian editorial. The consultation proposes removing vital information, including CEO-to-worker pay ratios and annual shareholder votes on director pay, while presuming that company reports primarily serve shareholders over other stakeholders.
Proposed Changes to Corporate Reporting
The consultation, first announced as part of the government's crusade against "red tape," targets the average annual report for some businesses, which now runs to 98,000 words. While the government argues some areas could be simplified, the proposals go further by scrapping the ratio between CEO and worker pay—a vital benchmark for inequality.
British CEOs already earn 95% more on average than their European equivalents, and opaque pay ratios only serve their interests, the editorial argues. There is scant evidence that higher-paid CEOs create more productive firms. As one Harvard Law School paper observed, pay ratios show how much a company invests in its "human capital" and matter to workers and investors alike. Consumers aware of this information are more likely to choose products from firms where the ratio is lower, encouraging those firms to address glaring pay disparities.
Removing Shareholder Accountability
The consultation also suggests removing annual shareholder votes on director pay, on the basis that votes are still required every three years. Annual votes were a modest attempt from Theresa May's Tory government to tame the "unacceptable face of capitalism," and the GC100 lobby group of corporate leaders has called to scrap them. By giving way, Labour would be removing a Tory policy designed to rein in boardroom greed.
Additionally, the consultation proposes allowing companies to shift towards fully virtual annual general meetings. Companies have been holding online AGMs since Covid, and the government suggests these can improve "accessibility." This is misguided, the editorial argues, as such meetings tend to be shorter and prevent shareholders from asking as many questions. In-person AGMs are an imperfect form of accountability, but confrontation is easier to avoid when people aren't in the room. Earlier this year, more than 50% of BP shareholders voted against a resolution to replace in-person AGMs with online meetings, with shareholders and climate groups arguing these were a threat to accountability.
A Call to Start Afresh
The editorial, referencing Milton Friedman's 1970 New York Times article arguing that the "social responsibility of business is to increase its profits," notes that Friedman and his fellow neoliberals saw companies as vehicles for enforcing their politics. Their ideas endured: UK bosses are now paid 130 times more than average workers.
If reporting is too onerous, it would be better to start afresh with a new regime that recognised the interests of workers and society at large, the editorial suggests. Some voluntary initiatives, such as B Corporations, already take a more holistic approach to the information they disclose. Even better would be a requirement to include workers on company boards and provide greater transparency on pay levels, including that of all executives and workers paid less than the living wage.
As the legal professor Katharina Pistor observes, corporate law is a tool that creates inequality. If the government wants to end neoliberalism, it should scrap this consultation and start again.
