Executive pay: Understanding the new regulations

Executive remuneration has been in the headlines as never before in the last few months. The so-called “shareholder Spring” has seen executive pay proposals rejected or subjected to significant challenge at a string of household names - Aviva, Trinity Mirror, WPP, William Hill, even Mr Kipling (in the form of its owner, Premier Foods) has not escaped.

All this while the coalition government is in the final stages of pushing through a series of changes to the way executive pay is managed and reported in UK listed companies, in what one remuneration consultant has called the most significant recasting of executive pay rules for a decade.

The coalition has pinned its colours firmly to the mast of shareholder engagement in its bid to control the disconnect between corporate performance and executive pay. In June 2012, Vince Cable, the Secretary of State for Business, Innovation and Skills, announced a package of measures for introducing binding shareholder votes on aspects of executive pay. At the same time, he launched a detailed consultation on proposed new regulations for the reporting of remuneration by listed companies. Both initiatives have roots in a series of reports, discussion papers and consultation exercises on the topic of executive pay published since the coalition came to power.

What you will find in this report

E-reward commissioned Andrew Menhennet, Principal Consultant at Yellow Hat Limited, specialist reward and communications training consultancy, to analyse the raft of new regulations impacting executive remuneration arrangements. His report summarises the main recommendations contained in the Department for Business, Innovation and Skills (BIS) proposals, and traces back the key themes as they have evolved over the series of consultations and announcements that came before.

The report also looks at the essential elements of the other main initiatives in the area of executive pay:

  • The independent state-of-the-nation report on executive pay by the High Pay Commission.
  • The Kay Review’s assessment of the role played by incentivisation practices for company directors as part of its recently-published report on the UK equity markets.
  • Will Hutton’s review into promoting fair pay in the public sector.
  • Associated developments which are shaping the future of senior pay in the public sector in a parallel strand to the BIS proposals.

To download a summary of the report, click here [PDF]

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