UK Government Announces its Proposals for Enhanced Shareholding Voting Rights on Executive Remuneration and Publishes a Consultation on Revised Remuneration Reporting Requirements
July 3, 2012
The Government has announced its proposals for the reform of executive remuneration in UK incorporated quoted companies. On June 20, 2012, the Secretary of State for Business, Innovation and Skills delivered a statement to the House of Commons announcing a package of measures intended to address failings in the corporate governance framework for executive remuneration. The measures focus on (a) giving shareholders more power to hold companies to account over the structure and level of directors’ remuneration through the introduction of binding votes on a company’s future remuneration policy, and (b) increasing transparency in remuneration reporting to make it clear what directors are earning and how this links to company strategy and performance. The announcement followed a consultation in March 2012 in which the government sought views on its proposals to enhance shareholders’ voting rights in relation to executive remuneration. The proposals announced on June 20, 2012 take account of the responses to that consultation and do not include some of the more controversial initiatives put forward by the Government, such as increasing the required level of shareholder support above 50% or introducing a binding vote on exit payments to directors that exceed one year’s base salary. Following the announcement, on June 27, 2012, the Government published amendments to the Enterprise and Regulatory Reform Bill to introduce the new shareholder voting regime and at the same time published a consultation to seek views on its proposals to increase transparency in remuneration reporting and in particular on draft regulations which will determine the form and content of directors’ remuneration reports.