The UK government has published a new bill providing (among other things) for the removal of the UK statutory provision preventing the making of remuneration of directors of listed companies conditional on shareholders’ approval. This follows the much-publicised consultation launched in March by UK Secretary of State for Business, Vince Cable, on enhanced shareholder voting rights on executive pay in UK quoted companies.
The new bill, the Enterprise and Regulatory Reform Bill 2012, was published on 23 May 2012. Currently, Subsection (1) of Section 439 of the Companies Act 2006 provides that a quoted company must put to its members a resolution approving the directors' remuneration report for each financial year, but Subsection (5) provides that no entitlement of a person to remuneration can be made conditional on such resolution being passed. The new bill proposes that Section 439(5) of the UK Companies Act 2006 be removed.
The new bill is part of an international move towards affording shareholders of listed companies greater influence over the issue of executive pay through enhanced voting rights. However, the proposal is only a first step in giving shareholders more of a “say on pay” in UK quoted companies and does not, for example, as the March consultation on executive pay had suggested, expressly grant a power to shareholders to exercise a binding vote on directors’ pay. However, the UK authorities are continuing to consider the area and further developments are likely. The significance for Irish listed companies is that reforms on this issue could ultimately be implemented by way of amendments to the UK Corporate Governance Code, to which Irish listed companies adhere.
For a link to the bill, please click here.