The Government has announced proposals to require companies to disclose as a single figure the aggregate remuneration earned by each director of a company, as recommended by Marketing Services Financial Intelligence (see Change the law to reduce Sorrell-style pay controversies). However, the proposals remain somewhat vague about how share-based earnings will be included in that figure.
The new disclosure plans were announced by Business Secretary Vince Cable yesterday, following a series of public controversies that culminated in last week’s shareholder rebellion against the pay of WPP’s Sir Martin Sorrell. They include a requirement to publish an “implementation” report on actual rewards together with a “policy” report. The Business Department confirmed to Marketing Services Financial Intelligence that the new proposals will apply only to UK public companies of which it is estimated there are about 1,000. A consultation document will be published in due course.
The proposals fall short of requiring up to 50% of their remuneration committee members to be nominated directly by large investors so as to avoid the risk of the committee’s membership being too closely allied with the board of directors.
The Government will also introduce a new binding vote on a company’s pay policy report “in order to empower shareholders and encourage improved dialogue with the companies they own”. This vote will require the support of a majority of shareholders voting to be carried.