New consultation on enhanced shareholder voting rights
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14 March
2012 - BIS
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.
This follows extensive
discussion with business leaders, investors, academics, governance
experts and a range of others, who agree there is a problem with rising
executive pay which is not linked to performance.
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.
Today’s proposals are part
of a wider package of measures announced by the Business Secretary in
January, aimed at addressing corporate governance failures in the way
executive pay is set in UK publicly quoted companies.
The total package included:
• Empowering shareholders
and promoting engagement through enhanced voting rights
• Greater transparency in
directors’ remuneration reports
• Increasing the diversity
of boards and remuneration committees
• Encouraging employees to
exercise their right to Information and Consultation Arrangements
• Working with investors and
business to promote best practice on pay-setting
Over the next few weeks the
Business Secretary and officials will meet investors, non-executive
directors, company secretaries, HR directors, lawyers and other experts
to discuss the Government’s proposals.
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.
Notes
1. The consultation document is available at: www.bis.gov.uk/Consultations/executive-pay-shareholder-voting-rights
2. Responses should be sent to executive.pay@bis.gsi.gov.uk
3. Subject to parliamentary time, primary legislation will be
brought forward in the next legislative session.
About the Author
© Crown Copyright. Material taken from the BIS Department for Business, Innovation and Skills. Reproduced under the terms and conditions of the Click-Use Licence.
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Article Published/Sorted/Amended on Scopulus 2012-03-14 11:44:01 in Business Articles
