Overview

This bill aims to increase transparency and employee voice in how large companies set executive pay. It mandates shareholder ratification of executive and top-earner compensation decisions and requires companies to disclose the pay ratio between top earners and the lowest-paid 10% of employees.

Description

The Company Remuneration Bill requires public companies and their subsidiaries in England and Wales to:

• Shareholder Ratification: Decisions made by a company's remuneration committee regarding 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 implementation.
• Employee Ballot: A secret ballot of all employees on these remuneration decisions must be held, though the outcome will not be legally binding.
• Annual Report Disclosure: The results of the employee ballot and the ratio between the highest-paid director/employee's remuneration and the average remuneration of the lowest-paid 10% of employees must be prominently displayed in the company's annual report.

The bill defines "remuneration" broadly to include all forms of compensation, and "remuneration committee" as a body responsible for setting and overseeing executive pay.

Government Spending

The bill is not expected to significantly increase or decrease government spending. Its primary impact is on corporate governance and reporting practices, not direct government expenditure.

Groups Affected

• Public Companies and Subsidiaries (in England and Wales): These companies will face new requirements regarding shareholder and employee consultation and transparency regarding executive pay.
• Shareholders: They gain a greater voice in determining executive compensation through the mandatory vote at the AGM.
• Employees: They gain a mechanism (non-binding ballot) for expressing their views on executive pay levels, promoting greater transparency and potentially influencing future decisions.
• Remuneration Committees: These committees will have their decision-making process altered by the requirement for both shareholder and employee input.

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