The Government yesterday published a discussion paper on quoted
company pay for directors. It is the first Government consultation
document on executive pay for over 10 years and has been produced
with the political backdrop of concern over executive pay
substantially increasing whereas average pay growth has recently
stalled. There are also general issues on pay for performance and
some investor concerns that pay issues seemingly lie unanswered by
companies.
The paper surveys the current position in the UK and how other
countries regulate pay. It then moves on to suggest ways in which
greater disclosure might deal with these issues, including starker
details on how much directors are paid, how pay and performance are
linked, the link to pay across an organisation, greater emphasis on
what pay will be rather than what it has already been and the
process for setting executive pay.
However, the paper concedes that greater transparency is unlikely
to provide all the answers. Shareholders are also being offered
more power: including a binding vote on remuneration and direct
shareholder involvement on nominations committees. A further
suggestion is that employees would have a direct say on
directors' pay through employee membership of the remuneration
committee and even an employee vote on remuneration. There is also
discussion about preventing plural membership of remuneration
committees by directors. Finally, there are suggestions for greater
transparency from remuneration consultants and other questions on
the structure of pay, including whether claw-back should become
compulsory, and the merits of greater deferral and alternative
measures of performance.
The discussion paper can be accessed
here. Comments are requested by 25 November 2011, but any
changes in this area are unlikely to be promoted ahead of
recommendations from Professor Kay's review of UK equity
markets next summer. Accordingly, no changes are likely to result
in the near future.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
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The original publication date for this article was 20/09/2011.