With the news today that Theresa May will become prime minister this Wednesday, we note with interest reports that she intends to make large companies more accountable by having consumers and employee representatives on boards. This resurrects an idea put to consultation by BIS during Vince Cable’s watch in the run-up to the introduction of the current regulations on directors’ pay, which was not carried through in the end.
In addition, we are told that in the wake of high-profile shareholder revolts on executive pay this AGM season, Mrs May plans to make the shareholder vote on the implementation of a company’s directors’ remuneration policy binding, rather than advisory as it currently is. It will be interesting to see how it is proposed that this will work. Companies will be reporting the outcome, in terms of value paid out during the relevant financial year and included in the “single figure” remuneration disclosure, of share awards to directors granted three (or even five) years previously by means of contractual agreements. Will a binding vote against mean that the company is expected somehow to renege on these contracts? Perhaps another situation in which companies will be expected to invoke claw-back?