An international accounting standard (IAS24) could force companies to disclose the full value of individual directors’ remuneration packages, according to consultancy Watson Wyatt.
IAS24, which EU-based companies will have to comply with for accounting periods ending 31 December 2005 onwards, requires additional disclosure of senior managers’ remuneration.
“While in the UK most elements of directors’ remuneration are already disclosed, this will be the first time that share plan values will have to be disclosed,” said John Ball, head of executive reward consulting at Watson Wyatt. “Some might consider this to be disclosure of directors’ remuneration through the back door.”
Watson Wyatt said, under IAS24, disclosure appears only to be required on an aggregate basis for key management personnel, rather than separately for each individual within this group.
However, once companies have produced accounts containing these aggregate figures, it is possible that there will be pressure from shareholders to provide the individual figures.
Companies need to begin considering their strategy for dealing with the new requirements, including responding to likely questions from investors and analysts, said Ball.
Disclosure under IAS24 must be made in a separate part of the company accounts and is in addition to the disclosures made under local legislation or stock exchange requirements, such as the Companies Act and Listing Requirements in the UK.
Disclosure is required in respect of the “key management personnel”. These are defined as “persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including any director (whether executive or otherwise) of that entity”.
According to Watson Wyatt, while this certainly includes the all board directors – including non-executives – it is not clear at this stage whether other key executives should also be included.