GC100 and Investor Group issues guidance on Directors’ Remuneration

  • GC100 Investor Group Guidance - Sept 2013 Image

12 Sep, 2013

The GC100 and Investor Group has today published 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”).

The regulations, which apply for quoted companies, completely change the requirements for the contents of the directors’ remuneration report and include some significant new disclosures, particularly a ‘single figure’ for the remuneration of each director. They come into effect for periods ending on or after 30 September 2013. 

The guidance entitled ‘Directors’ Remuneration Reporting Guidance’ considers itself as “best practice” and has been developed after consultation with a number of interested parties.  The GC100 and Investor Group acknowledge that “the guidance is not intended to be exhaustive or definitive” and would expect companies not to adopt a “boilerplate” approach but instead be innovative in reporting to suit their specific company requirements. 

The guidance, which is in the same order as the regulations, is structured to include: 

  • Each requirement from the regulations, by paragraph, which are then supplemented with guidance;
  • Mandatory disclosures which a company would need to include to ensure compliance with regulations; and
  • Other disclosures which, although not required by the regulations, would promote “effective engagement between investors and companies”. 

The GC100 and Investor Group notes that flexibility needs to be provided for in drafting the remuneration policy.  They highlight that “once the framework of remuneration has been approved by the shareholders; each year the remuneration committee will need flexibility to determine pay, short-term incentives and the terms of long-term incentives”.     

Note.  The guidance was updated on 14 October 2013 to reflect minor amendments including a clarification when the new requirements are applicable from. 

*Update 18 August 2016 - a revised version of the guidance was issued.  The revised guidance largely follows the previous version, but also includes a number of detailed changes which will need to be considered by companies in preparing their next policy and report including; the disclosure of the maximum level of each component of remuneration for each executive director and that the maximum salary that might be paid must be explained in monetary terms or any other way appropriate to the company (e.g. percentage of salary); the exercise of discretion and judgement in determining directors' pay; how the disclosure of commercially sensitive performance measures or targets should be approached; and the linkage between the directors' remuneration report and strategic report*

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