Reforms proposed by the Department for Business, Innovation and Skills (Bis) on executive pay came into force on 1 October 2013.
As a result of the reforms shareholders of around 900 UK-quoted companies will now be better prepared to hold companies to account. They will have access to clearer information on the pay of top executives and will be able to exercise their new legally binding vote on executive pay.
The main changes to the executive pay reporting regulations include:
- A pay policy that will be subject to the new legally binding vote. All payments, including exit payments, must be covered by the policy.
- An illustration of the level of awards that could pay out for various levels of performance, meaning pay information is presented in a more understandable format.
- All elements of directors’ pay will be reported in a single, cumulative figure. The regulations define how this should be calculated so that all companies are consistent in their approach.
- Improved disclosure on the performance conditions used to assess variable pay of directors.
In addition, changes to simplify and strengthen companies’ non-financial reports also come into force. These are aimed at strengthening the ability of shareholders to hold quoted companies to account over the course of the financial year.
From 1 October, the reports will include additional information on human rights issues, the gender of the board and senior management, and disclosures on greenhouse gas emissions.
The main changes include:
- The introduction of a strategic report. This aims to help companies tell their story, starting with their strategy and business model, the principle risks and challenges they have faced and opportunities in the coming year.
- A statement of the gender balance at board level, in senior management and in the company as a whole. This aims to focus attention on board diversity and the company’s ability to retain and develop its most talented employees.
- New disclosures on greenhouse gas emissions. This aims to encourage the companies to think about ways in which these can be reduced.
- Information on human rights issues that could affect the business.
The narrative reporting changes will affect all reports produced in relation to financial years ending on, or after, 30 September 2013.
Vince Cable, business secretary, said: “Over the last decade, the pay of our top executives has quadrupled, but it has not always been an indication of how well a particular company has performed.
“At the same time, company reports have become increasingly complicated without giving shareholders the right sort of details they need in order to evaluate performance.
“The signs are that we are moving in the right direction and in the last year we’ve seen some restraint. Our reforms mean shareholders will now no longer be kept in the dark. They now have powerful tools for every shareholder, big or small, to speak up and challenge companies over excessive pay and prevent big bosses being rewarded for failure.”
Gillian Chapman, head of employment and incentives at law firm Linklaters, added: “These are the most significant changes in this area since the introduction of the original disclosure regime ten years ago.
“Companies are now preparing to comply with the new rules for the first time. There will be some tricky issues to navigate through: honouring existing contractual obligations, transition to shareholder approved policies and preparing the single figure pay disclosures for each director.”
Discontent over top pay and bonuses has been growing for some time and at recent AGMs, investor disquiet has been evident. These reforms are intended to promote transparency and empower shareholders to have a say in salary and bonus arrangements for top executives at publicly-listed companies.
Shareholders already had an advisory vote on the implementation report, which contains details of how the policy was implemented in the past financial year, including remuneration and loss of office payments to directors, and the link between performance and pay. However, these changes will also provide those shareholders with a binding vote at least every three years on the remuneration policy, covering the company’s policy for the future on remuneration payments and payments for loss of office.
The remuneration policy must set out the company’s proposed approach to rewarding directors and how this supports the company’s long-term strategy and performance. The policy will also include details of the company’s proposed approach to recruitment and loss of office payments.
These provisions do have teeth and will help answer some of the growing calls for more shareholder empowerment over remuneration and severance packages. Once the policy is approved, the company will only be able to make payments within the limits it allows. Any contractual term which appears to bind the company to make a payment not allowed for within the policy will have no effect. If a director approves a payment which falls outside the scope of the policy, they may find themselves jointly and severally liable to indemnify the company against any loss resulting from the payment, though a court may grant relief from liability if the director can show that he or she acted honestly and reasonably.
In the past, shareholders received some surprises when they read in the annual report that payments had been made – the intention here is to announce figures much quicker after departure so that shareholders can challenge them sooner if necessary. But the real challenge will be to comply with announcement obligations where amounts due to directors are not yet known or are in dispute.
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Louis Cardinals have much in common.
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Jones, of course, played in arguably the most hitting friendly era in major league history.
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As Frazier walked out of Yankee Stadium, he was asked what the latest buzz on Twitter was, and he said he had stopped looking for a while, his mind clear of that concern at least temporarily.
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Like Price, Stanton is barely in the Top 10 at his position.
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Miami also acquired the second competitive balance pick, No.
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With the Yankees slumping, St.
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Imagine the legal exposure of MLB by deciding to do nothing when a proposal was on the table, when the public information on the effect of concussions is ubiquitous and changing other sports, and when baseball was concerned enough about concussions previously to establish a separate disabled list for that specific injury..