Remuneration archive

What’s really happening to executive pay?

  • PwC research shows FTSE 100 executive pay rises are modest, but remuneration committees should continue exercising caution.

Remuneration reporting: year two

  • As companies prepare their second remuneration reports under the new regime, quality could be improved by more tailored content and clearer information about performance targets.

Rewarding employees: time for a radical rethink

  • Companies need to understand employee preferences in order to maximise the impact of their reward packages.

Remuneration policies: how big are your changes?

  • Companies need to think carefully about whether to seek shareholder approval for remuneration policy changes, including those made to comply with the revised UK Corporate Governance Code.

Calculating holiday pay: what now?

  • Results of AGMs for companies with December year ends are now filtering through. 29 companies with less than 85% support for the remuneration report
  • As yet only one company has an overall negative vote on the remuneration resolutions

Update on the new remuneration reporting regime

  • The first binding votes have been cast at January and February AGMs on the Directors' Remuneration Policy
  • For the 20 companies with September year ends, the level of support has been consistently high
  • Companies with December and March year ends will face the challenge of meeting investor requirements while retaining flexibility

Pay: what goes up must come down

  • Are the forces shaping executive pay here to stay? More regulation is tending to dampen pay; and simpler pay packages are reducing pay too
  • UK executive pay has doubled since the millennium
  • But in the last two years, bonuses to FTSE100 chief executives have fallen and salary freezes have become commonplace

Update on the new remuneration reporting regime

  • Challenge to balance specificity that shareholders want and flexibility that companies may need
  • BIS has requested FRC consult on whether certain changes should go into the governance code

Outcome of 2013 AGM season – votes on remuneration reports

  • No company in FTSE 100 suffered an overall vote against its remuneration report but not ‘back to normal’
  • Shareholders more critical about remuneration report vote

Legislation for new-style remuneration reporting is final

  • Legislation is final on the new-style remuneration report
  • UK companies listed in the UK, New York or in the EEA must prepare remuneration reports compliant with the new regulations for years ending on or after 30 September 2013

Audit implications of new BIS regulations

  • More extensive audit requirements , including disclosures on how performance measures have been met with pay, and directors’ shareholding and share interests
  • Auditors to consider whether pay disclosures are: ‘fair, balanced and understandable’

CRD IV – implications outside the financial sector?

  • CRD IV likely to extend bonuses cap beyond financial sector
  • UK investors want simpler pay systems

Salaries and bonuses – approach this year?

  • FTSE remuneration committees heeding shareholder calls on pay and performance – 35% (of those surveyed) have frozen CEO base pay

Interactions between board committees

  • Increased push for board committees (audit, remuneration, risk) to interact

Survey of non-executive directors’ fees

  • NEDs’ fees rising slower in the FTSE 100 than in the FTSE 250
  • Fees for committee membership also plateauing

Deferral of bonuses and other income

  • Around 30% of the FTSE 100 is considering some form of bonus deferral to take advantage of the drop in the top rate of income tax
  • Bonus deferral is likely to receive press attention

BIS legislation due in May

  • Legislation likely be final in May 2013, affecting first those with financial years ending on 30th September
  • The annual binding vote on policy may be included at report stage
  • FRC advises BIS to hold back on legislation and ask investor bodies to issue guidance instead

BIS legislation expected in March

  • Implementation of remuneration law on disclosure due Oct 2013
  • FRC Lab is looking at disclosure scenarios and CEO pay
  • Investors have provided guidance on what’s useful for them

Disagreements delay CRD 4 vote in Europe

  • Parliament has postponed vote until March
  • Disagreements eg, on remuneration (bonuses cap); employee representation on remuneration committee