Addressing executive pay

Posted in Reporting, News on 13 October 2016 By Rachel Crossley, Senior Reporting Consultant

In September, a briefing by an independent non-party think tank, the High Pay Centre criticised levels of executive remuneration and called for annual, binding shareholder votes on executive pay.

This follows a report published in July by the Executive Remuneration Working Group, chaired by Nigel Wilson, CEO of Legal & General. Tasked with delivering recommendations on how to simplify and restore trust in executive pay in the UK, it has advised action in five key areas:

  • strengthening remuneration committees and their accountability;
  • improving shareholder engagement;
  • increasing transparency in target-setting and use of discretion;
  • addressing the level of executive pay; and
  • setting parameters to illustrate how different structures may operate to gain market trust.

The Financial Reporting Council (FRC) has welcomed the findings of this report and is considering new guidelines on remuneration committees as concerns over levels of executive pay continue to rise, not only amongst the public but increasingly also in investor and government circles.

The remuneration report, the most widely read section of a company’s annual report, provides an opportunity to address stakeholder concerns by setting out any initiatives they plan to undertake in these areas by clearly explaining the rationale behind the policies they put in place.  

Without this level of transparency, listed companies could face similar shareholder revolts to BP and Weir Group, whose executive pay packets were voted down at their AGMs earlier this year.  The government is also threatening to intervene in how remuneration packages are structured and approved by investors.

Please contact our Head of Consultancy Services, Rachel Crossley to arrange a review of your company’s annual reporting including its implications for shareholder engagement.

Take a look at the OneSavings Bank case study for an example of some of our recent work.

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