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Directors' remuneration

All companies, except those that are small, are required to make certain disclosures about the aggregate remuneration of the directors. Quoted (and, for periods commencing on or after 10 June 2019, traded) companies are subject to considerably more onerous requirements involving preparation of a directors’ remuneration report including detailed information about each director’s remuneration.

New requirements come into force for accounting periods commencing on or after 1 January 2019. The Companies (Miscellaneous Reporting) Regulations 2018 introduce new requirements for the directors’ remuneration report including:

  • For the first time all quoted and UK registered companies with more than 250 employees will need to publish annually the ratio of their chief executive officer’s 'single figure' total remuneration to the median, 25th and 75th percentile total remuneration of their full time equivalent UK employees in their directors’ remuneration report. Pay ratios will need to be calculated on a group-wide basis by reference to UK employees only.
  • Companies will need to explain the reasons for changes to the ratio year on year and also whether the company believes the median ratio is consistent with the company’s wider policies on employee pay, reward and progression.
  • Supporting information will also be required, including the methodology used to calculate the pay ratios.
  • The notes to the single-figure in the Annual Report on Remuneration will need to provide additional guidance on the impact of share price movements on the outcomes, and detail on whether discretion has been exercised to reflect share price movements.
  • In the next new remuneration policy, there will be a requirement to provide an illustration in the directors’ remuneration report of the impact of potential future share price increases on executive pay outcomes that are linked to performance periods of more than one financial year (e.g. LTIP awards), assuming share price growth of 50 per cent over the period.

Additionally the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 (SI 2019/970) (the 2019 Regulations), which partially implement the Shareholders Rights Directive extend the scope of the remuneration reporting to include unquoted traded companies and introduce new requirements in respect of the directors’ remuneration policy and the directors’ remuneration report.

The changes in the 2019 Regulations to the requirements for quoted companies on the remuneration policy apply in respect of any new policy brought to shareholders for approval on or after 10 June 2019, while the changes to remuneration reporting take effect in respect of financial years starting on or after 10 June 2019. In June 2019 the government published some guidance and answers to frequently asked questions about these regulations. The GC 100 and Investor Group has also published updated guidance to assist directors of quoted (and, for periods commencing on or after 10 June 2019, traded) companies to apply the directors’ remuneration reporting requirements including the new regulations discussed above.

Click for direct access to specific directors' remuneration resources:

Latest Resources

Accounting Roundup - Closing Out 2019

10 Dec 2019

Closing Out 2019 discusses the significant corporate reporting issues relevant to 31 December 2019 annual reports, covering areas of regulatory focus identified in the FRC’s Annual Review of Corporate Reporting 2018/2019 and the ESMA’s common enforcement priorities for issuers in the European Union, together with other developments in reporting standards and areas of investor interest.

Investment Association publishes updated Principles of Remuneration

11 Nov 2019

The Investment Association (IA) has published its updated Principles of Remuneration ("the Principles").

GC100 and Investor Group issue updated directors' remuneration reporting guidance

01 Aug 2019

The GC100 and Investor Group has published updated guidance ("the guidance") to assist directors of listed companies to apply the directors’ remuneration report requirements set out in The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 ("the regulations”) as amended.

Government publishes guidance on new directors' remuneration regulations

14 Jun 2019

The government has published a set of answers to frequently asked questions on the Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 (the Regulations).

Government approves legislation amending directors' remuneration requirements

30 May 2019

The Companies (Directors' Remuneration Policy and Directors' Remuneration Report) Regulations 2019 ("the Regulations") have been approved.

Government publishes draft legislation amending directors' remuneration requirements

15 Apr 2019

The Companies (Directors’ Remuneration Policy and Directors’ Remuneration Report) Regulations 2019 (the draft Regulations) have been laid before Parliament.

Investment Association publishes updated Principles of Remuneration

28 Nov 2018

The Investment Association (IA) has published its updated Principles of Remuneration ("the Principles").

Need to know — Government publishes new company reporting requirements for private and public companies in response to its consultation on Corporate Governance Reform

21 Jun 2018

The Companies (Miscellaneous reporting) Regulations 2018 (the draft Regulations) have been laid before Parliament and make the legal changes necessary for the Government’s package of corporate governance reforms announced by the Department for Business, Energy and Industrial Strategy (BEIS) in August 2017.

Governance in brief — BEIS issues legislation to deliver key corporate governance reforms

20 Jun 2018

The Companies (Miscellaneous Reporting) Regulations 2018 have been laid before Parliament. These represent the legislative strand of the Government’s package of corporate governance reforms announced by BEIS in August 2017.

Investment Association publishes updated Principles of Remuneration

06 Nov 2017

The Investment Association (IA) has published its updated Principles of Remuneration ("the Principles").

Government to set new legislation to take forward its corporate governance reforms

30 Aug 2017

The Government has set out its plans to move forward with its corporate governance reforms following its Green Paper issued last November and also the BEIS Select Committee inquiry into corporate governance which reported in April 2017.

Governance in brief — BEIS Select Committee inquiry report calls for reforms to the UK Corporate Governance Code and greater enforcement

25 May 2017

A next step in the corporate governance reform agenda has been the publication in April 2017 of the BEIS Select Committee inquiry report.

BEIS Select Committee publishes its report on corporate governance

06 Apr 2017

The Business, Energy and Industrial Strategy (BEIS) Select Committee has published its report following its inquiry and consultation on corporate governance launched in September 2016, recommending that action must be taken to address a lack of trust in business. Whilst the findings of the Select Committee are not binding on the Government, the proposals laid out in this report may be taken into consideration in any subsequent White Paper on Corporate Governance Reform.

Governance in brief — Government issues Green Paper on corporate governance reform

02 Dec 2016

The Department for Business, Energy & Industrial Strategy (BEIS) has issued a Green Paper seeking views on how to improve the UK corporate governance framework and setting out options for updating the framework and reforming executive remuneration. The aim of the Green Paper is to consider what changes might be appropriate in the UK corporate governance regime to help ensure that we have an economy that works for everyone

BEIS issues Green Paper on Corporate Governance

29 Nov 2016

The Department for Business, Energy & Industrial Strategy (BEIS) has issued a Green Paper seeking views on how to improve the UK corporate governance framework and setting out options for updating the framework and reforming executive remuneration. The consultation closes on 17th February 2017.

Investment Association publishes updated Principles of Remuneration

01 Nov 2016

The Investment Association (IA) has published its updated Principles of Remuneration ("the Principles").

Executive Remuneration Working Group report provides recommendations to rebuild trust in executive pay

27 Jul 2016

The Executive Remuneration Working Group, established by the Investment Association, has published a report which provides ten recommendations to “rebuild trust in executive pay structures in the UK”.

Governance in focus: Audit committees in 2016 — refocusing the agenda

13 Jul 2016

Another reporting and AGM season is over but as we approve interim results, inevitably we look at agendas for the rest of the year. At our Centre for Corporate Governance we want to help you set your agenda, which is why we have provided you this half year round-up of areas your audit committee will need to consider during the remainder of your meetings in 2016 and into 2017.

Aditi Gupta, Jenny Chu and Xing Ge: Form Over Substance? An Investigation of Recent Remuneration Disclosure Changes in the UK

06 Jul 2016

This paper analyses how UK-incorporated FTSE 100 companies have responded to the 2013 changes in UK company law that increased the level of disclosure required in directors' remuneration reports.

Be careful what you wish for - Simplifying executive pay

15 Apr 2016

In a few weeks’ time we expect the Investment Association Working Group to publish proposals for a ‘radical simplification’ of executive pay arrangements For some years media commentators, investor bodies and some investors have vilified the complexity of pay arrangements for company directors. Simple but effective remuneration is the Holy Grail of the executive remuneration world. But it is not entirely clear what is meant by complexity and it is not certain that this is the real problem. The real problem as we see it, is not really about complexity, but about making sure that the pay of directors is fair and transparent to the directors themselves, shareholders and to the outside world. This publication explores the complexity of the real problem and analyses the individual elements of the remuneration package to determine what structure would be best for companies.

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