Consultation on enhanced shareholder voting rights over executive pay
The Department for Business, Innovation & Skills (BIS) has today launched a consultation on measures to "give company shareholders greater influence over executive pay, through enhanced voting rights".
The consultation sets out a range of measures including:
An annual binding vote on future remuneration policy.
Increasing the level of support required on votes on future remuneration policy.
An annual advisory vote on how pay policy was implemented in the previous year.
A binding vote on exit payments of more than one year’s salary.
Under these proposals, companies will have to report each year on how they have responded to shareholder concerns and taken previous votes into account. The objective is to "promote better engagement between companies and those that invest in them, and create a stronger link between pay and performance".
Business Secretary, Vince Cable said:
“Good corporate governance is vital to creating the right environment for long-term, sustainable growth. Shareholders are at the heart of the UK corporate governance framework, so it’s appropriate that we put more information and power in their hands.
“I have no problem with business celebrating success and rewarding talent, but I have heard frustration from all circles that director’s pay goes up when times are good, and yet it still goes up when performance is poor. I want shareholders to feel empowered to prevent rewards for mediocrity or failure.”
These measures will require primary legislation. The purpose of the consultation is to seek evidence on their potential costs and benefits, and the likely impact on business. The consultation closes on 27 April 2012. BIS will then confirm the precise measures government expects to take forward in primary legislation.
Draft regulations to determine the content of directors’ remuneration reports will be published at the same time. Together, these measures will "create a more robust framework within which executive pay is set, agreed and reported on".
Want to know more?
The consultation document is available at: www.bis.gov.uk/Consultations/executive-pay-shareholder-voting-rights.
Responses should be sent to firstname.lastname@example.org. The consultation closes on 27 April 2012.
The consultation builds on the evidence received in response to a discussion paper on executive remuneration, published last year. The discussion paper can be found at: www.bis.gov.uk/Consultations/executive-remuneration-discussion-paper.
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