Executive pay: a new direction

On 23 January 2012, Vince Cable, the Secretary of State for Business, Innovation and Skills (BIS) announced changes to reform the governance of executive pay for listed UK companies. So, how will these changes affect the remuneration strategy of your business?

Watch our short video for a snapshot of what the new changes mean for executive pay.

The proposals fall under four headings:

  • greater transparency
  • more shareholder power
  • reform of remuneration committees
  • best practice led by the business and investor community

While the proposals don’t present any challenges that might prevent a company from listing in the UK, there's a lot of work in store for companies to simplify and communicate the information required.

The most significant change is the binding vote for shareholders on future pay. This will force companies and their shareholders to engage more - no one will want the figures subject to vote to come as a surprise. But at this stage, the Government has only announced the headlines. Changes to the shareholder vote require a change to primary legislation so we’re expecting to see more consultation on this.

Whether the changes have any impact on actual pay levels is another matter.  Certainly anyone expecting to see a dramatic drop in pay levels is likely to be disappointed. But the measures should help build public confidence that executive pay decisions are subject to proper scrutiny and transparent.   They give shareholders everything they need to hold companies to account on pay.