On 22 November 2011, the High Pay Commission (‘the Commission’)2 published its final report on executive pay in the private sector. The report, which deals mainly with executive pay in listed and other publicly quoted companies, contains twelve recommendations for reform.
The proposals include the following:
- the simplification of executive pay structure: executive pay to comprise a basic salary and, ‘where absolutely necessary’, one performance-related element. The Commission’s preference is for a performance share plan award, or a similar system, that would vest in six to ten years after its grant;
- reform of shareholder vote on executive pay: the vote, which the Commission believes should remain non-binding, should be forward-looking and relate to pay over the three subsequent years; and
the simplification and extension of disclosure, including:
- the presentation of directors’ remuneration reports in a standardised form showing a single total remuneration figure for each director;
- the publication by listed companies of ‘fair pay reports’ showing the ratio of highest to median pay within the company; and
- the disclosure of the top ten executive remuneration packages below board level.
The Commission envisages that its recommendations would be implemented by way of amendments to the UK Corporate Governance Code, or other voluntary means, with the introduction of legislation only if necessary.
High Pay Commission report: Cheques with Balances: why tackling high pay is in the national interest: November 2011 available at: http://highpaycommission.co.uk/wp-content/uploads/2011/11/HPC_final_report_WEB.pdf