Labour claims new company rules will not stop a repeat of scandals like BHS collapse

Business Secretary Greg Clark set out proposals for workers to be represented by a non-executive director with a responsibility to represent their interests.

But the TUC argued the idea fell short of the promise made by Theresa May to give workers a bigger say in how companies are run.

The shake-up of the rules governing how companies are run include an alternative option of setting up advisory panels to represent the interests of employees and customers.

The Green Paper also proposes giving shareholders a binding vote on executive pay levels and to extend governance rules for publicly listed companies so that they cover the largest privately owned firms too.

Mr Clark said that the reforms on pay responded to the fact that “executive pay has grown much faster over the last two decades than pay generally and at times is not in line with corporate performance”.

He continued: “The document seeks views on this issue, in particular how to strengthen shareholder voting rights with a view to making them binding; encouraging shareholder engagement with executive pay and promoting greater transparency over pay,” he said.

And he confirmed that the Government is seeking “views on whether some of the features of corporate governance which have served us well in our listed companies should be extended to the largest privately held companies”.

Mr Clark said that the UK continued to have some of the tightest corporate governance rules in the world, and said concerns related to “a very small number of businesses which have undermined the reputation of British business generally”.

But Labour claimed the package of measures would do nothing to prevent a repeat of scandals such as the collapse of the BHS store chain.

Shadow Business Secretary Clive Lewis said: “Bringing private companies into the PLC rule book strikes one as a move so targeted at a particular series of events, that it will, I expect, come to be known as the BHS law.

“But had the proposals outlined today by the secretary of state been in place six months ago, I’m not wholly convinced that we would have avoided the corporate governance scandals that have plagued the last summer.

“To force private companies to abide by the corporate governance code will do little unless that code is tightened.

“BHS may have been a private company, but Sports Direct isn’t, and we all know what has gone on there.”

TUC general secretary Frances O’Grady said: “This is not what Theresa May promised. Today’s proposals are disappointing and will not do enough to shake-up corporate Britain.

“We need the voice of elected workers in the boardroom, rather than on advisory panels.”