The Directors’ Remuneration Report Regulations have led to greater transparency and accountability on executive pay, according to a report commissioned by the Department of Trade and Industry.
On the basis of a review of company annual reports and survey of shareholders, the DTI report concluded that the majority of the FTSE 250 companies studied are complying with the regulations, which require them to produce detailed annual reports on directors’ remuneration, and to hold a shareholder vote on that report.
However, it did reveal that many companies use standardised language that does not explain what their executive remuneration policy aims to achieve.
In some areas, the study found that shareholders did not want more information, but wanted information to be presented in a more understandable format. Shareholders also sought explanations of the reasons behind the policies, especially where remuneration committees are able to use their discretion.
The TUC said that there was still a long way to go in curbing executive pay, and the secretary of state for trade and industry, Patricia Hewitt, said that further improvements to disclosure and the links between pay and performance should be pursued through the development of best practice guidelines.