Overview

This bill aims to increase transparency and employee involvement in the decision-making process regarding executive pay in larger companies. It mandates shareholder ratification of remuneration committee decisions and requires companies to report on pay ratios between top and bottom earners.

Description

The Company Remuneration Bill requires companies to implement several key changes regarding executive compensation:

Remuneration Committee Decisions

Decisions made by a company's remuneration committee concerning the pay of directors and the five highest-paid employees must be approved by a simple majority vote at the company's annual general meeting (AGM) before they can be implemented.

Employee Ballot

A secret ballot of all employees on the remuneration decisions must also be conducted, though this ballot will not be legally binding.

Annual Report Requirements

The results of the employee ballot must be published in the company's annual report. The report must also clearly state the ratio between the highest paid director or employee's remuneration and the average remuneration of the lowest-paid 10% of employees.

Definitions

The bill defines "company" as public companies and their subsidiaries, "employee" as someone employed by the company and working partly or wholly in the UK, "remuneration" broadly to include all forms of compensation, and "remuneration committee" as a body responsible for setting executive pay.

Geographic Scope

The bill applies only to England and Wales.

Government Spending

The bill is not expected to directly impact government spending. The costs of implementation will fall on the companies themselves.

Groups Affected

This bill will affect:

• Large Companies (Public and their Subsidiaries): These companies will be subject to the new regulations, incurring costs related to implementing the new processes and reporting requirements.
• Shareholders: They will have a greater say in executive pay through the mandatory AGM vote.
• Employees: They will have a voice (via the non-binding ballot) in executive compensation decisions and will have access to more information on pay disparities within the company.
• Remuneration Committees: Their role will be strengthened, as their decisions will require shareholder approval.

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