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GC100 issues supplemental guidance on Directors’ Remuneration

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09 Jan 2015

The GC100 and Investor Group (“the Group”) has published a ‘2014 Statement” (“the 2014 Statement”) which provides supplemental guidance to the 2013 GC 100 and Investor Group Directors’ Remuneration Reporting Guidance (“the 2013 Guidance”).

In light of experience over the 2014 AGM season and recent developments, the Group felt that there were a number of issues included within the 2013 Guidance that required further supplementary guidance and a number of areas that could be further clarified to promote best practice reporting.

Further supplementary guidance is provided in the following areas:

  • Assurances regarding remuneration policies.  The Group highlights that some remuneration committees have published assurances about the way aspects of their proposed policies would be implemented.  The 2014 Statement indicates that such assurances should be provided on the accounts and reports section of a company’s website and in the remuneration reports in the following years of the policy’s term as a disclosure regarding policy implementation in those years,
  • 2014 UK Corporate Governance Code – impact on remuneration policies previously approved – malus and clawback.  The Group suggests that companies which plan to extend withholding and recovery provisions in response to the 2014 UK Corporate Governance Code “may wish to consider (in consultation with investors) deferring this to the next scheduled policy renewal, presenting for approval a new policy amended accordingly or devising some other solution, for which they may wish to seek appropriate advice (e as regards any risk of making awards or payments ‘inconsistent’ with approved policy”.
  • Information about the approved policy in subsequent remuneration reports.  The Group does not consider that the full policy needs to be included in every report but that “sufficient information should be included to help shareholders easily assess the reported remuneration in the context of relevant aspects of the policy, and that at least the policy table should be included”.  The Group also highlight that the full policy should be available and signposted on the company’s website.

In addition, the 2014 Statement seeks to clarify the following areas:

  • Linking remuneration to company strategy
  • Applying the GC 100 and Investor Group guidance on discretion
  • Performance targets – protecting genuine commercial sensitivity yet achieving transparency
  • Remuneration component maxima
  • Shareholding requirements – compliance, time to comply and enforcement by remuneration committees
  • Remuneration committees should aim to improve clarity

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