Companies in Britain should be forced to share rising profits with their workers through a change in the law, a thinktank has said.
The Social Market Foundation said the government should tighten corporate governance laws to ramp up the pressure on company bosses to pay staff higher wages.
In a package of recommendations to force businesses to do more to support workers, the SMF said a new duty should be imposed on company directors. It said changes to a part of company law known as section 172 should be made to make sure that employees, at all levels of a company, share in the proceeds of growth.
Firms should also be forced to write reports explaining pay decisions and strategies for wage and career progression, according to a report warning that politicians, firms and investors needed to make talk of socially responsible capitalism a reality.
The report from the cross-party thinktank comes after a lost decade for wage rises in Britain. Average pay after inflation is no higher today than it was before the financial crisis.
The government has made several above-inflation increases in the minimum wage in recent years and promised to take the legal minimum to £10.50 by 2024.
However, a record 439,000 people were illegally paid below the minimum wage last year, while as many as 6 million people across the country are also paid less than the real living wage – a voluntary minimum paid by more than 5,000 companies designed to reflect real living costs that is currently set at £9 across the UK and £10.55 in London.
Louise Woodruff, the policy manager at the Joseph Rowntree Foundation, which supported the SMF research, said it was unacceptable that Britain could have both record levels of employment and four million workers trapped in poverty.
“Work should provide a route to a better life, but low pay, insecure hours and lack of progression opportunities are holding people back,” she said.
The intervention comes after the bosses of 181 of the US’s biggest companies changed the official definition of “the purpose of a corporation” from making the most money possible for shareholders to “improving our society”, including for the benefit of staff and the environment.
Nicole Gicheva, a researcher at the SMF, said: “Too many British workers are still trapped in low pay. Sensible policies can help all businesses take responsibility for helping staff out of that trap through better-paid work and more training.”
“The best employers already know that paying and training staff well is good for business: they keep workers for longer and get more out of them. Corporate governance laws should be updated to encourage all firms to meet the standards set by the best.”