Listed Company Director Remuneration – Final Draft Regulations Published

United Kingdom
The Department for Business, Innovation & Skills (BIS) has published the final draft of its legislation setting out the compulsory contents of new-style directors’ remuneration reports.  The draft is not subject to further external consultation and, subject to any last minute changes, is likely to be the legislation laid before Parliament within the next two weeks for final approval (which is expected to be a formality).

The revised regulations do not change the key proposals (to access our previous Law Now summarising last years’ draft regulations, please click here), which are:

  • separate ‘policy’ and ‘implementation’ sections within the directors’ remuneration report; and
  • the policy section being subject to a binding shareholder vote at up to 3 yearly intervals with the implementation section being subject to a separate annual advisory shareholder vote
but a number of small changes have been made, along with a welcome change allowing companies not to disclose confidential information.

In more detail, some of the changes are:

  • commercially sensitive information exception - performance measures and targets which are ‘commercially sensitive information’ do not need to be disclosed, provided companies explain why they have chosen not to disclose and say when (if at all) the information is to be disclosed.  This applies both to prospective and paid-out awards. However, it remains to be seen whether companies are prepared to use this exception or indeed if its use results in shareholder concerns.
  • limit on pay at recruitment - the limit on pay at recruitment required to be stated is now on variable pay rather than salary and does not cover one-off payments to compensate for the forfeiture of awards from a previous employment. Again, this gives greater flexibility for companies when making new hires. 
  • explanation of differences in pay policy between directors and employees – this is a new requirement in addition to the requirements to report on how employee pay generally influences director pay policy and whether employees have been consulted on directors’ pay.

  • single remuneration figure for each director can include items where targets are substantially completed – the ability to include items in a remuneration report where the targets are substantially but not fully completed by the end of a particular financial year will allow for the flexibility to include the outcome of awards in the most appropriate financial year.



Companies with a financial year end of 30 September 2013 remain the first to have to comply with the new rules though BIS promises further guidance.
It is important to note that the financial aspects of any director severance arrangements for a termination on or after 1 October will have to be disclosed on the company’s website once agreed.

Listed companies will already have started reviewing their existing arrangements, but now the draft regulations have been confirmed to be in virtually final form, action should now be taken to ensure formulation of appropriate remuneration policies and how they should be reported, and companies should then move to assess their report’s detailed compliance with the final rules.

Companies should seek a legal review of their policies and reports in good time to ensure they are compliant with the regulations in order to avoid any surprises.

To access the revised draft regulations, please click here.

If you require any assistance in reviewing your policies in light of the regulations please contact Nicholas Stretch, Isabel Pooley or Tair Hussain.