Q&As

What do I need to know about the new shareholders' vote on directors' pay?

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Published on LexisPSL on 04/12/2013

The following Corporate Q&A provides comprehensive and up to date legal information covering:

  • What do I need to know about the new shareholders' vote on directors' pay?
  • The reforms
  • Affected companies
  • Effective date
  • New shareholder voting regime
  • What if shareholders vote down a resolution?
  • Restrictions on payments to directors
  • Further information

What do I need to know about the new shareholders' vote on directors' pay?

Shareholders are increasingly voicing their concerns at what they perceive as excessive pay increases and pay offs for directors that are not justified by company performance. In recent years companies have seen a significant rise in protest votes against remuneration practices at their annual general meetings. Against this backdrop, the Government has introduced sweeping reforms to the Companies Act 2006 (CA 2006) rules on directors' remuneration reporting and shareholder voting.

The reforms

The changes to the statutory directors' remuneration reporting regime are, in a nutshell:

  1. the remuneration report is split into a section on directors’ remuneration policy and an annual report on its implementation

  2. the policy section is subject to a binding shareholder vote

  3. the annual report on remuneration is subject to an advisory shareholder vote

  4. the content requirements for the remuneration report have been completely rewritten

  5. all remuneration and loss of office payments must be

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