Consultation opens on directors pay proposals

The DTI has begun its consultation
process on the Government’s draft regulations on directors’ pay.

The draft regulations
aim to strengthen disclosure requirements particularly in relation to policy on
directors’ remuneration and to introduce a requirement for an
annual shareholder vote on the directors’ remuneration report.

Under the proposals quoted
companies will be required to produce a directors’ remuneration report as part
of the annual reporting cycle.

Key elements of the
report would be:

– a forward-looking
report on remuneration policy, which will have to include details of the
company’s performance criteria for long-term incentive schemes

– one or more
performance graphs which will show how the company has performed over a five
year period in comparison with selected competitors

– improved disclosure
on directors’ contracts and compensation payments including a requirement to
provide an explanation of compensation payments made in the previous financial
year

– new disclosure
requirements relating to the role of the remuneration committee to ensure
greater clarity about the way in which the remuneration packages of executive
directors are decided.

The DTI believes that
directors face a conflict of interest when they become involved in deciding
their own pay and the proposed legislation will improve transparency and help
protect the integrity of both individual directors and companies.

The consultation period
ends on 15 March.

Draft regulations: www.dti.gov.uk/cld/current.htm

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