Business Secretary, Vince Cable has announced revised plans following the recent consultation on the subject that the IR Society took part in. Annual binding votes on executive remuneration will now not take place. However there will be instead:
- Binding votes on executive pay every three years if a company chooses to leave its remuneration policy unchanged - however, this becomes a binding annual vote if the policy changes. If the binding vote does not pass, the company will retain the existing remuneration policy until shareholders agree a revised one. Once a new policy is agreed any further changes require further shareholder approval.
- Companies will then have to stick to their pay plans for the next three years or have another shareholder vote
- The publishing of a single figure every year showing how much executives have been paid.
- The publishing of exit payments - saying how much directors will be paid if they are sacked or resign.
BIS have taken on board representations through consultation, including some of our own. The binding vote will require a simple majority of more than 50% for a policy to pass, which we support. We considered that a special resolution figure of 75% indicated a materially significance to remuneration policies. We also indicated to our Government our agreement in principle with a single figure and that in certain circumstances an overall single remuneration figure could be helpful in helping companies communicate with their investors, while making a suggestion instead for two stated numbers – one giving pay related to the year to date and one relating to long term value creation. Furthermore, we stated our agreement in principle with the idea of a binding vote as a way of building openness and commitment in the remuneration framework through working towards better long-term dialogue on appropriate risk taking in delivering strategic and operational outcomes.
Published: 21 June, 2012