Executive Pay – Companies told to place less emphasis on the market in revised corporate governance Code

The Financial Reporting Council (‘FRC’) has now issued its revised Corporate Governance Code, following a consultation period earlier this year.  The revisions deal in part with executive remuneration, and are aimed at improving the alignment between executive pay and the creation of sustained business value.  The new Code also introduces the requirement that companies should be able to claw back pay from executives in certain circumstances.  Companies within the scope of the Code (all companies with a premium UK listing) must either comply with the Code’s provisions, or explain to shareholders why they are not compliant.  The full Code can be downloaded from the FRC’s website.

The new Code marks a shift away from the linkage between pay and the need to recruit and retain high calibre executives (a key principle in previous versions of the Code).  Instead, remuneration committees must consider a wide range of factors specific to the nature and circumstances of the business when setting pay for executives.  In his new blog, Andrew Menhennet discusses what this means in practice for the use of market data – much maligned by the FRC for what it sees as the resulting upward ‘ratchet’ effect on executive pay.  To find out what he thinks, follow the link to the Yellow Hat blog page.


« Back