New laws will require companies to justify their pay gap and report on how their policies “act in the interests of employees and shareholders”.
Public companies in the UK will be required to justify pay differences between the pay of chief executives and their staff, according to a government announcement.
Directors also face demands to set out how they work in the interests of employees and shareholders.
Business secretary Greg Clark said: "One of Britain’s biggest assets in competing in the global economy is our deserved reputation for being a dependable and confident place in which to do business.
"Most of the UK’s largest companies get their business practices right but we understand the anger of workers and shareholders when bosses’ pay is out of step with company
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The European Court of Justice has published guidance on "gun-jumping", a failure by merging parties to comply with the “standstill obligation”, which requires companies to seek clearance by a competition authority before implementing a merger.