Directors to face pay clampdown

The government has introduced new measures to curb the excessive pay of executives at the largest companies.

It is introducing regulations, which will apply to large and medium-sized companies and groups, with effect from 1 October 2013. It says the changes mean that investors will be better informed about how much directors have been, and will be, paid, along with how this relates to company performance.

The government says that as a result, shareholders of around 900 main market companies will be better prepared to hold companies to account, using clearer information on pay to exercise their new legally binding vote on executive pay.

Business Minister Jo Swinson said on 25 June: “For too long the pay of some directors has been out of sync with the performance of their company.

“This is why we made a number of reforms to address this, giving shareholders the clear information and robust tools they need to take action.”

The main changes to the pay reporting regulations include:

  • a pay policy, which will be subject to the new legally binding vote
  • an illustration of the level of awards that could be paid for various levels of performance, so that pay information is presented in a more understandable format
  • all elements of director’s pay will be reported in a single, cumulative figure. The regulations define how this should be calculated so that all companies are consistent in their approach and
  • improved disclosure on the performance conditions used to assess variable pay of directors.

Link: Details of the regulations