Will government proposals for shareholder votes on directors’ pay be effective. Kathryn Cearns reports
As the financial crisis segues into a longer term recession and sovereign debt issue, the corporate world continues to suffer an onslaught of criticism over the pay of directors of public companies. What started as specific complaints over bank executive pay has moved into broader attacks on rewards at the top of the wider corporate community. The government has proposed further legislation in this area (through amendments to the Enterprise and Regulatory Reform Bill), to facilitate the engagement of investors with the issue, but what will it achieve? Indeed, there is a question which seems further than ever from being answered: what is the appropriate level of executive pay?
The current situation
Since 2002, UK quoted companies (as defined by the Companies Act 2006, s 385) have been obliged to give an advisory vote to their shareholders on their directors’ remuneration report (DRR). This gives a means for shareholders to express their views on the overall approach to director remuneration, without the inherent complexities of interfering with contractual arrangements
