Reforms to curb excessive executive pay have been confirmed today after the new regulations were laid before Parliament, Business Minister Jo Swinson announced.
From 1 October 2013 investors will be better informed about how much directors have been and will be paid along with how this relates to company performance. As a result, shareholders of around 900 main market companies will be better prepared to hold companies to account, using clearer information on pay to exercise their new legally binding vote on executive pay.
Business Minister Jo Swinson said:
For too long the pay of some directors has been out of sync with the performance of their company. While we have started to see shareholders become more engaged, with last year’s ‘shareholder spring’ a prime example, previously when they raised their voices with concerns they were not always listened to.
This is why we made a number of reforms to address this, giving shareholders the clear information and robust tools they need to take action. Our changes will help to create the right environment for responsible, long-term, private sector growth, which will in turn support a stronger economy and a fairer society.
The main changes to the pay reporting regulations include:
- A pay policy, which will be subject to the new legally binding vote.
- 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 director’s 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.
Notes to editors
The regulations as laid before Parliament can be found here https://www.gov.uk/government/publications/draft-regulations-the-large-and-medium-sized-companies-and-groups-accounts-and-reports-amendment-regulations-2013
The consultation on revised remuneration reporting regulations from 2012 can be found here https://www.gov.uk/government/consultations/directors-pay-revised-remuneration-reporting-regulations
The government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries’. It set four ambitions in the ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011:
- to create the most competitive tax system in the G20
- to make the UK the best place in Europe to start, finance and grow a business
- to encourage investment and exports as a route to a more balanced economy
- to create a more educated workforce that is the most flexible in Europe.
Work is underway across government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the government wants the economy to travel.