Further to last week’s article covering recent developments in corporate governance, on 19 June last, the UK Business Secretary Vince Cable announced a comprehensive set of reforms of the framework for directors’ remuneration.
According to the UK Department for Business, Innovation and Skills (the BIS), the package of reforms will address failures in corporate governance by empowering shareholders to engage effectively with companies on pay. It will:
- Give shareholders binding votes on pay policy and exit payments, so they can hold companies to account and prevent rewards for failure;
- Boost transparency regarding what directors are paid, and so that the link between pay and performance is clearly drawn;
- Ensure that reform has a lasting impact by empowering business and investors to maintain recent activism.
The UK Government will introduce these reforms through amendments to the Enterprise and Regulatory Reform Bill, which is currently before Parliament. The Bill can be accessed via the link above to last week’s corporate governance article.
Revised, simplified regulations setting out how companies must report directors’ pay will be published at the same time. A consultation exercise is expected to be carried out on the regulations.
The UK Government intends all these reforms to be enacted by October 2013.