After a year long period of consultation, the Government has finalised its revised remuneration reporting regulations for directors in quoted companies. The regulations are detailed; this is a high-level summary.
Remuneration reports will now consist of two distinct parts – an annual remuneration report and a directors' remuneration policy report. The policy part will have to include a number of set elements, including key features of director pay; remuneration provisions of service contracts and the approach to recruitment packages; the policy on termination payments and how general employee pay and shareholder views have been taken into account. It must also contain an illustration of the level of awards that could pay out for various levels of performance.
The annual remuneration report will outline how the pay policy has been implemented in the previous year, with a single total pay figure for each director, broken down into set elements, and details of any termination payments and of total pension entitlements.
In conjunction with these new reporting rules, there are changes to shareholder votes on executive pay. There will be an annual binding vote unless the pay policy is left unchanged, in which case there will be a vote every three years. There will also be an annual advisory vote on the non-policy part and if this vote is lost, this will trigger a binding vote on policy the next year. All remuneration and loss of office payments must be consistent with an approved policy.
The new rules start to apply from 1 October, depending on companies' financial year end dates.