From 1 October 2013, UK listed companies will be subject to new rules concerning the approval and disclosure of directors’ pay. The changes are in part a reaction to the massive increases in directors’ pay over the last decade and the well publicised examples of ‘reward for failure’. The new rules have been the subject of much political discussion since they were first mooted in 2011, and represent the biggest change in the area of directors’ pay since UK companies were first required to produce a directors’ remuneration report in 2002. The key changes are:
- A new binding shareholder vote on a company’s remuneration policy for directors (including the policy on terminations and remuneration packages for new appointments)
- The ability to recover from directors any payments made to them outside of the approved remuneration policy
- An advisory shareholder vote on the implementation of the director’s remuneration policy
- Inclusion in the implementation report of a single figure for the total remuneration of each director
- Information on pay policy for other employees within the group and how that was taken into account when setting directors’ pay
- Other new requirements intended to make remuneration disclosure more transparent and to show how remuneration is linked to company strategy and performance
The new rules will apply to UK listed companies with a financial year ending on or after 30 September 2013.
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