12/18/2014

Investorstovoteontoppay|Business|TheGuardian

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Investorstovoteontoppay
Governmentcurbsboardroomexcessthreeyearsafter
promisingaction
LucyWardandJillTreanor
TheGuardian,Wednesday26June200201.59BST

Legislationtocurbboardroomexcess,whichcompelscompaniestogiveshareholdersan
annualvoteondirectors'salaries,finallywentbeforeparliamentyesterdaythreeyears
afteritwasfirstmooted.
Thetradeandindustrysecretary,PatriciaHewitt,promisedthatthenewregulations,
expectedtobecomelawbyJuly31,wouldincreasetransparencyoverthesettingof
executivepayandlinkswithperformance.
Whilethenewruleswillstillnotgiveshareholderstheopportunitytovetoremuneration
dealstheydislike,ministersarguethatanegativevotewouldsendastrongmessageto
directorstoeaseuponpay.
ThisviewwasechoedbytheNationalAssociationofPensionFunds,whosemembers
controlmorethan20%ofthestockmarketandwhichiswagingcampaignsagainst
breachesofcorporategovernancerulesinboardroomsofcompaniesincludingSafeway
andCable&Wireless.
Shareholdershaverecentlyhadsuccessinpreventingnewpaydealsbeingforcedupon
them,particularlythepotential18mforJonathanBloomer,thechiefexecutiveof
Prudential.
TheNAPFbelievesthat,hadthegovernmentactedsooner,itmighthavebeeneasierfor
shareholderstodetercontroversialpaydeals.TheseincludethatforSirChristopher
Gent,thechiefexecutiveofVodafonewhowaspaid2.4mduringayearinwhichthe
mobilephoneoperatorreportedBritain'sbiggestevercorporateloss.
"We'vebeencallingforavoteforsometime.Thesoonerithappensthebetter.Ithas
alreadytakenthreeyears,"anNAPFspokesmansaid.
http://www.theguardian.com/business/2002/jun/26/executivepay.uknews

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12/18/2014

Investorstovoteontoppay|Business|TheGuardian

Otherindustrysourcesalsobelievethegovernmenthasbeenslowtoactandquestion
whethertheruleswillstillbeenoughtoforcethroughachangeinboardroomattitudes.
Theregulations,whichamendthe1985CompaniesAct,willforcefirmstopublishan
annualreportondirectors'payandtoputthereporttoashareholdervote.Atthe
moment,companiesareundernoobligationtoputthepaydealsoftopexecutives
beforeshareholders.
Someinvestorshadhopedthatthegovernmentcouldavoidtakingthelegislativeroute
and,instead,changetheCityrulesknownasthecombinedcode.
Reportsondirectors'paywillhavetoincludedetailsofindividualdirectors'remuner
ationandjustificationforanycompensationpackagesgiveninthepreviousyear.They
willalsohavetocoverdetailsoftheboard'sdiscussionsonpay,membershipofthe
remunerationcommittee,anyconsultantsusedanddelivera"forwardlooking
statement"oncompanypaypolicy,includinganexplanationofhowpackagesrelateto
performance.
Followingaconsultationonitsoriginaldraftregulations,theDepartmentofTradeand
Industryhasalsointroducedarequirementthatcompaniesdiscloseanyotherlinks
betweenremunerationconsultantsandthecompany.
Afurtherchangewillrequirecompaniestopublishagraphprovidinginformationon
theirperformanceincomparisonwithanappropriatesharemarketindex.
MsHewittsaidyesterday:"Topclasspayforthebestperformersissomethingwe
support.Buttherecanbelittledoubtthatsomecompanydirectorshavereceivedlavish
payawardsincircumstanceswhentheyaren'tdeserved.
"Wesharetheviewofmanyshareholdersandemployeesthatthisisunacceptableand
hastochange,andit'simportantthatshareholdersshouldbeabletoexpresstheirviews
aboutremunerationpackages."
2014GuardianNewsandMediaLimitedoritsaffiliatedcompanies.Allrightsreserved.

http://www.theguardian.com/business/2002/jun/26/executivepay.uknews

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