Large banks are under pressure to disclose how many members of staff earn more than £1 million as a result of recommendations outlined in a review conducted by banker David Walker.

The Walker Review, published today, also proposed extending the role of the remuneration committee to cover the remuneration policy for the entire firm, while also taking direct responsibility for the pay of all high-earning staff.

Walker also said that at least half of variable pay or bonuses should be paid in the form of a long-term incentive scheme with half vesting after three years and the rest after five years. In addition, the review said that two-thirds of cash bonuses should also be deferred.

Walker said: “The fundamental change needed is to make the boardroom a more challenging environment than it has often been in the past.

"This requires non-executives able to devote sufficient time to the role in order to assess risk and ask tough questions about strategy."

Institutional shareholders are also being encouraged to be tougher on company boards to improve standards of corporate governance.

Walker said: “Institutional investors should be less passive and prepared to engage earlier if they suspect weaknesses in governance. They enjoy the privilege of limited liability whereas taxpayers have ended up assuming unlimited liability in respect of the big banks. Early preventive medicine through shareholder engagement can save everyone substantial time and money later on.”

The Walker Review proposes that most of the recommendations are enforced through a combined code on corporate governance or a separate ‘stewardship’ code for institutional investors, both operating on a ‘comply or explain’ basis. It would be for the Financial Reporting Council, which has been closely consulted and is currently reviewing the combined code, to decide exactly how this would be done.

The Financial Services Authority (FSA) will consider how to take forward the recommendations applying principally to financial institutions. It is proposed that the recommendations on pay disclosure should be enforced through legislation in the forthcoming Financial Services Bill.

The Chartered Institute of Personnel Development (CIPD) has welcomed Walker’s recommendations but have said that an over-focus on reward must not obscure the other risks associated with the way people are managed.

Charles Cotton, policy Adviser at the CIPD, said: “Risk committees need to look beyond just pay and bonuses, to review whether company culture, performance management and appraisal, talent management, leadership and organisational development are also sources of potential organisational hazard."