The UK Financial Reporting Council (FRC) has launched a consultation to assess whether the UK Corporate Governance Code should be amended in relation to certain aspects of executives’ payment rules.
The consultation comes after the UK government enacted the Enterprise and Regulatory Reform Act 2013 and the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013.
Both instruments are effective 1 October and deal with issues regarding voting and reporting on executive remuneration.
"The government’s new legislation underlines the importance of boards and investors engaging on directors’ remuneration. The FRC is undertaking this consultation to understand if there is a case for changes to the Code," FRC chairman Baroness Hogg said.
The FRC’s consultation is aimed at gathering stakeholders’ opinions on three topics. First, clawback arrangements;
Secondly, ifnon-executive directors who are also executive directors in other companies should be allowed to sit on the remuneration committee;
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And thirdly, what actions companies might take if they fail to obtain a majority in support of a resolution on remuneration.
"There is no presumption on the FRC’s part as to the outcome. All interested parties will have an opportunity to make their views known before we reach a final decision," Baroness Hogg said.
The Institute of Chartered Accountants in England and Wales head of corporate governance Jo Iwasaki said shareholder rights over remuneration has been on public consciousness, although guidance on robust engagement has only been issued this month.
"Good practice takes time to evolve and guidance needs time to embed. While executive remuneration has been high in the public’s awareness, it is not clear that there is appetite for further changes to the existing Corporate Governance Code.
Furthermore, the UK Corporate Governance Code draws its strength, durability and consistency from its principles-based approach and we recognise the issues in the consultation," Iwasaki added.
The FRC said that if changes to the UK Corporate Governance Codeare proposed, they will be subject to consultation in the first quarter of 2014.