On March 14, 2012, the UK Government published a consultation paper on its proposals to give shareholders of quoted companies a greater influence over executive pay.
The Government proposes to introduce a binding shareholder vote on executive pay policy (possibly requiring a 65% or 75% super majority), a non-binding shareholder vote on the subsequent application of that pay policy and a binding shareholder vote on exit payments in excess of one year's basic salary.
The new rules would apply to certain UK quoted companies. The new rules would apply to those companies with either a standard or a premium listing on the London Stock Exchange main market and UK incorporated companies listed on the NYSE, NASDAQ or officially listed in another EEA member state but would not apply to companies trading on AIM or the Plus Growth market. The rules would replace the existing requirement for a non-binding vote on the director's remuneration report.
Existing Regulation of Executive Pay
Since 2003 UK company law has required that quoted companies produce a directors' remuneration report (which forms part of their annual report and accounts) and seek an advisory vote on that remuneration report. These reports provide detailed disclosure of the pay and benefits for the financial year in question but contain limited information about the bonus and incentive targets for the following financial year.read more