In the UK, the Financial Reporting Council (FRC) has commenced a consultation process seeking feedback on whether the UK Corporate Governance Code (the Code) should be amended, following the recent enactment of the new directors' remuneration legislation. The FRC took the decision to conduct this consultation after the finalisation and enactment of the legislation (outlined above) on directors' remuneration, which was enacted on 1 October.
The FRC is seeking feedback on the following three specific proposals:
- Extended clawback provisions – the FRC is seeking feedback on the specific issue of payments for failure, and whether all quoted companies should have a clawback mechanism in place or whether provisions should be put in place to permit companies to reclaim variable components of remuneration in exceptional circumstances of misstatement or misconduct;
- Remuneration Committee Membership – specifically the FRC asks whether changes to the Code are required to deter the appointment of executive directors to the remuneration committees of other listed companies in order to deal with the perceived conflict in terms of pay setting and pay levels; and
- Votes against the remuneration resolutions – specifically, the FRC is seeking feedback on the issue of how boards should respond in the event that they fail to obtain at least a substantial majority in support of a resolution on remuneration.
Feedback on the consultation is sought until 6 December 2013. If any changes to the Code are proposed, they will be subject to a further consultation process in the first quarter of 2014. The updated Code would then apply to financial years beginning on or after 1 October 2014.