Executives: Pay

Department for Business, Energy and Industrial Strategy written question – answered on 21st October 2019.

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Photo of Faisal Rashid Faisal Rashid Labour, Warrington South

To ask the Secretary of State for Business, Energy and Industrial Strategy, if she will bring forward legislative proposals to ensure that executive (a) salaries and (b) bonuses reflect the performance of the companies they run.

Photo of Kelly Tolhurst Kelly Tolhurst Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

The existing legal framework provides full transparency about directors’ remuneration arrangements, including on salaries and bonuses, and gives shareholders a strong say on pay.

Since 2013, the law has required quoted companies to prepare a directors’ remuneration policy. This must set out how the company proposes to pay directors, including every element of remuneration that a director is entitled to and how it supports the company’s long-term strategy and performance. Companies are required to put the remuneration policy to a binding shareholder vote at least once every three years.

Companies must also publish an annual remuneration report showing how the approved pay policy has been implemented, including a single figure for the total pay directors received that year. This report is subject to an annual advisory vote. If the company loses this vote, it is required to put a new remuneration policy to shareholders the following year.

Alongside the legislative requirements, the UK Corporate Governance Code includes principles and provisions setting out how companies should approach executive remuneration, including a principle that executive remuneration should be “aligned to company purpose and values and be clearly linked to the successful delivery of the company’s long-term strategy”. The Financial Conduct Authority’s Listing Rules require companies to make a report in their corporate governance statement to enable shareholders to evaluate how the principles have been applied.

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