News Release issued by
the COI News Distribution Service on 19 September 2011
Investors will
have greater clarity on how top businesses are run and how
executive pay is matched to performance under proposals published
today by Business Secretary Vince Cable.
Proposals published as part of a consultation paper will simplify
the reporting requirements for companies, providing clear and
relevant information to investors on performance and pay. It will
increase transparency and accountability in the investment chain
and enable shareholders to get a real picture of what is happening
to inform their investment decisions and help our economy grow.
Measures to improve reporting on remuneration include requiring
companies to provide information on the link between the
performance of companies and top executives earnings. For example,
requiring disclosure where the remuneration committee has agreed
to pay bonuses when performance targets have not been met.
It also asks:
whether to require the total figure for each board director’s
remuneration to be published, including basic salary, bonuses,
share schemes and pensions and how this should be calculated;
whether the ratio between the CEO’s pay and median earnings in a
company should be published; andin line with proposals for large
banks, whether to disclose the highest earners in a company below
board level, for example those earning above a defined threshold
of total pay, or a defined number of top earners who have
significant influence over how a company is run or those who have
the ability to take significant risk.
The consultation also sets out Government plans to divide
companies’ narrative reports into two documents so that it is
easier for companies to prepare investors to identify the
information they need. We will review the disclosure requirements
that we place on companies to streamline and remove
inconsistencies so that they can get on with growing and planning
for the long-term.
The two documents proposed are:
Building on Lord Davies report on Women on Boards the
consultation also seeks views on whether companies should be
required to publish the number of women who sit on their boards
and executive committees.
Business Secretary Vince Cable said:
“The average length of an annual report is now almost 100 pages
and even longer for FTSE 100 companies. It has become unwieldy,
complex and hard to understand, so investors cannot easily find
the information they need.
“Changing the way companies do their annual reports will provide
investors with better information on how well business are
performing and what their directors are being paid, increase
transparency and reduce the burden on business freeing them up to
concentrate on growing and focusing on the long-term.
Also published today is a discussion paper on executive pay,
focusing on how to curb pay asymmetry – where escalating pay at
the top does not correlate with company performance.
The discussion paper is a result of conversations Government has
had with shareholders, investors and business leaders on pay and
sets out their thoughts. These include:
whether there is a case for a binding vote for shareholders on
deciding pay;diversifying the membership of remuneration
committees to encourage greater challenge. For example, having
employee representation;how to simplify and improve the structure
of remuneration to incentivise and reward sustainable long-term
performance; andimproved research and guidance on remuneration to
help companies and shareholders make more informed decisions on
pay.
Commenting on the discussion paper, the Business Secretary, said:
“The Government wants the UK to be a magnet for attracting and
retaining the best talent, and we do not want to do anything to
jeopardise this aim.
“Executive remuneration that is well structured, linked to the
objectives of the company and rewards directors who contribute to
the long-term success of the company is an important way of
promoting sustainability and growth.
“However, there are concerns about the disconnect between how our
largest listed companies perform and the rewards that are on
offer. This is not sustainable.
“Concern over this is not just coming from Government. Investors,
business groups and captains of industry have all told us that
this is real problem and needs to be addressed.
“We have put a wide range of options up for discussion so we can
decide what is workable and end up in a place where remuneration
is genuinely matched to performance and long term success.”
The deadline for all relevant parties to contribute their views
to the discussion paper is 25 th November 2011. The consultation
on narrative reporting ‘The Future of Narrative Reporting,
Consultation on a New Reporting Framework.’ will last for 12 weeks
and close on 25 November.
Notes to Editors
1. The Future of Narrative Reporting, Consultation on a New
Reporting Framework can viewed at
http://www.bis.gov.uk/Consultations/future-of-narrative-reporting-further-consultation
2. BIS Discussion Paper: Executive Remuneration can be viewed at
http://www.bis.gov.uk/Consultations/executive-remuneration-discussion-paper
3. The consultation follows on from the call for evidence ‘A
long-term focus for corporate Britain’ launched in October 2010, a
comprehensive review of corporate governance and economic
short-termism in the UK. A summary of responses was published in
March 2011 and the Government will bring forward firm proposals
following the consultation later this year.
4.On 22 June 2011, the Secretary of State for Business, Vince
Cable, announced that Professor John Kay would undertake an
independent review to examine investment in UK equity markets and
its impact on the long-term performance and governance of UK
quoted companies. On 15th September 2011, Professor Kay launched
the review’s call for evidence which builds on the previously
published terms of reference, and sets out a range of issues and
questions on which we would particularly welcome evidence. To view
the work of the review please go to
http://www.bis.gov.uk/Consultations/kay-review-call-for-evidence-uk-equity-markets
5. BIS's online newsroom contains the latest press
notices, speeches, as well as video and images for download. It
also features an up to date list of BIS press office contacts. See
http://www.bis.gov.uk/newsroom for more information.
Contacts:
BIS Press Office
NDS.BIS@coi.gsi.gov.uk
Joshua Coe
Phone: 020 7215 5943
Joshua.Coe@bis.gsi.gov.uk