Reporting of executive pay to change from October
Following the publication of the government’s final rules on remuneration reports, companies with financial years beginning on 1st October 2013 or later will be required to publish more information on the pay received by their directors.
When the new measures come into force, the emphasis will be much more on justifying the pay received rather than just giving an account of it, which includes explaining how salaries relate to strategy and performance.
This information will be contained in two separate reports. The first, a forward-looking pay policy report, must outline every pay element that a director could receive, and the related performance measures. However, certain commercially-sensitive data relating to performance targets or outcomes will not need to be released.
While this report will be subject to a binding vote by shareholders, the second one, covering how the remuneration policy has been implemented in the previous year will be subject to an advisory vote.
The latter report outlines the total payments made to directors, including former directors, by the company, and can provide further details regarding how this was calculated.
“For too long the pay of some directors has been out of sync with the performance of their company,” said Business Minister Jo Swinson. “While we have started to see shareholders become more engaged, previously when they raised their voices with concerns they were not always listened to.
“That is why we made a number of reforms to address this, giving shareholders the clear information and robust tools they need to take action.”