FRC publishes consultation on executive remuneration

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02 Oct, 2013

The Financial Reporting Council (FRC) has today published a consultation on whether to amend the UK Corporate Governance Code (“the Code”) to address a number of matters relating to executive remuneration. Comments are requested in writing by 6 December 2013.

There are three main issues on which views are sought: 

    1. Clawback provisions.  Whether the current Code requirements are sufficient around clawback arrangements or whether the Code should include a “comply or explain” presumption that companies have provisions to recover and/or withhold variable pay.  The consultation also asks whether the Code should adopt the terminology of the new directors’ remuneration regulations and specifically note circumstances under which payments could be recovered/withheld;
    2. Remuneration Committee membership.  Whether non-executive directors who are also executive directors in other companies should sit on the remuneration committee to avoid the perceived conflict of interest that may arise; and
    3. Vote against the remuneration report.  Actions companies might take if they fail to obtain a substantial majority in support of a resolution on remuneration.  The consultation asks whether there should be an explicit requirement in the Code to report to the market in circumstances where a company fails to obtain at least a substantial majority in support of a resolution on remuneration. 

In providing their comments, the FRC would like respondents to have regard to the new directors’ remuneration report regulations published by the Department for Business, Innovation and Skills (BIS), the guidance issued by the GC100 and Investor Group on implementing those regulations and the Financial Conduct Authority’s current consultation on changes to the Listing Rules as a result of the new regulations. 

As well as consulting on the three specific issues, the FRC would also like respondents to highlight whether they feel that there should be any further changes to the remuneration sections of the Code. 

Any changes would be applicable for accounting periods beginning on or after 1 October 2014.

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