Government strengthens reporting framework for directors' pay
皇冠体育app Government is consulting on draft regulations on what companies must disclose in pay reports.
27 Jun 2012
皇冠体育appse regulations will fully replace existing rules and are designed to create a robust framework within which directors鈥� pay is set, agreed and implemented. 皇冠体育app revised regulations will:
- Streamline company disclosure requirements so that reports are focussed on making the link between pay and performance crystal clear
- Introduce a new requirement to report the total pay directors received for the year as a single figure
- Ensure shareholder engagement is sustained over the long term.
To support the new shareholder voting regime, remuneration reports will in future be split in two parts:
- A forward-looking policy report, which will be subject to the binding shareholder vote - once approved, the company will only be able to make payments within the limits it allows
- A report on how the policy was implemented, which will be subject to an annual advisory vote.
皇冠体育app Government invites comments on the draft regulations by 26 September 2012.
Business Secretary Vince Cable said:
鈥淥ver the last decade directors鈥� pay has quadrupled with no clear link to company performance. At the same time company reports have become increasingly complex without giving shareholders the information they need.
鈥溁使谔逵齛ppse regulations will significantly improve reporting. For the first time companies will be required to set out every element of pay that a director could be entitled to and how it supports long-term company strategy and performance. If the policy isn鈥檛 specific enough, shareholders will have a legally binding vote they can use to reject it.
鈥淐ompanies will also have to clearly disclose directors鈥� pay in a single figure. This means that it will no longer be possible to mask what they are actually earning.
鈥淚 expect shareholders to use this new framework to maintain recent activism and challenge companies to inject greater pay discipline and prevent rewards for failure.鈥�
皇冠体育app regulations are expected to come into effect from October 2013, alongside primary legislation on binding votes. 皇冠体育app Government has also tabled amendments to the Enterprise and Regulatory Reform Bill that will allow the new voting regime to become law.
Links
- , including introducing a new binding vote on company pay policy.