Blink and you would have missed it, but without fanfare the Government has suggested a small but relatively significant tweak to executive remuneration reporting. Buried deep in draft statutory instruments issued by the Department for Business, Enterprise and Regulatory Reform (DBERR) in the Autumn comes the following clause:
“The directors’ remuneration report must contain a statement of how pay and employment conditions of employees of the company and of other undertakings within the same group as the company were taken into account when determining directors’ remuneration for the relevant financial year.”
If you want to find it look at page 142 of the snappily-titled ‘The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008’ (see address below). It will look familiar to many readers as it is similar in wording to a rather famous, and famously ignored, piece of guidance in the Combined Code. In a supporting principle, the Code states that remuneration committees “should also be sensitive to pay and employment conditions elsewhere in the group, especially when determining annual salary increases.”
Critics of remuneration reporting often use this as an example of where companies provide boilerplate reporting. Trade unions, who have long argued for the inclusion of comparable information about employees’ and directors’ pay and benefits, believe that the Code guidance is routinely ignored.
If the proposed change goes through it will come into force from April 2008. As it stands it puts some pressure on companies to provide some kind of commentary, but PIRC believes the lack of guidance on the type of information to include will reduce the measure’s potential value. Given that this is a rare opportunity to improve remuneration reporting to address a long-standing criticism, we believe a bit more prescription is in order. Surely the clause could be redrafted to specify the provision of some basic comparable data on pay, pensions and other benefits?
Friday, 30 November 2007
Pay disclosure improves on the quiet
This is a straight lift from the PIRC website: