Overview

This bill aims to increase transparency and employee voice in the setting of executive pay within UK companies. It mandates shareholder ratification of remuneration committee decisions and requires companies to disclose pay ratios between top and bottom earners in their annual reports.

Description

The Company Remuneration Bill requires significant changes to how UK companies determine and report executive compensation. Key aspects include:

Remuneration Committee Decisions

Decisions made by a company's remuneration committee regarding the pay of directors and the five highest-paid employees must be ratified by a shareholder vote at the annual general meeting (AGM). This ratification must be via an ordinary resolution.

Employee Ballot

A secret ballot of all company employees on the remuneration committee's decisions is also mandated. While this ballot is not legally binding, its results must be reported.

Annual Report Requirements

Companies must prominently display the results of the employee ballot in their annual reports. They must also clearly show the ratio between the highest earner’s remuneration and the average remuneration of the lowest-paid 10% of employees.

Definitions

The bill defines "company" to include public companies and their subsidiaries, "employee" to include those working wholly or partly in the UK, and "remuneration" broadly to cover all forms of compensation.

Geographic Scope

The bill applies only to England and Wales.

Government Spending

The bill does not directly involve government spending. The costs of implementation will be borne by the companies themselves, potentially influencing their administration costs. No figures are provided in the bill itself regarding financial impacts.

Groups Affected

• Public companies and their subsidiaries (in England and Wales): These companies will face increased administrative burdens in implementing the new rules regarding shareholder and employee votes and reporting requirements.
• Shareholders: They gain a greater voice in determining executive pay through the mandatory vote at the AGM.
• Employees: They gain a voice, though non-binding, in the decision-making process through the secret ballot. Increased transparency in pay ratios may also lead to improved understanding of pay structures within the company.
• Remuneration Committees: These committees will face altered processes, needing to secure both shareholder and employee input for pay decisions.

Powered by nyModel