Friday, 25 November 2016

UK: The Purposeful Company - interim report on executive remuneration published

The Big Innovation Centre, as part of its Purposeful Company project, has today published an interim report on executive remuneration: see here (pdf). The report sets out to provide (to quote directly from it) "a provocative challenge to the received wisdom on executive pay". This challenge extends to some of the common policy proposals in this area (e.g., pay ratios).  Four policy proposals, with supporting rationale and analysis, are put forward for discussion (again, to quote directly from the report):
  • Shareholder guidelines and the UK Corporate Governance Code should enable companies to adopt simpler pay structures for CEOs based on long-term equity and debt holdings to encourage long-term behaviour and to avoid the unintended consequences of over-reliance on performance-based incentives.
  • Companies should be required to publish a Fair Pay Charter explaining policy and outcomes for wider employee pay and fairness and to engage with employees on its content including specified disclosures on pay comparisons.
  • The Directors’ Remuneration Reporting regulations should be updated to enable greater stakeholder understanding of a company’s maximum pay and relationship between pay and performance.
  • A binding vote regime should be triggered when companies lose, or repeatedly fail to achieve a threshold level of support on, the advisory remuneration vote.

No comments: