Submission with the UK’s Financial Reporting Council in response to Directors’ Remuneration (Consultation Document)

  • Date:03 Dec 2013
  • Type:Policy submission

On 3 December 2013, Company Directors lodged a submission with the UK’s Financial Reporting Council in response to its Consultation Document, Directors’ Remuneration (Consultation Document).

While the Consultation Document relates to UK regulation, and in particular the expansion of the UK Corporate Governance Code, Company Directors considered it to be important to make a submission on the document as:

  • some of our members sit on the boards of UK companies; and
  • there is a tendency for Australian regulators to look to the regulations that are in place in other jurisdictions when developing regulation for Australia.

Company Directors’ comments included:

  • As there is no “one size fits all” approach to executive remuneration or corporate governance more generally, it is important that companies are allowed maximum flexibility in adopting the remuneration and governance arrangements that are the most appropriate for their circumstances.
  • While the Code applies on a “comply or explain” basis so that companies are not required to comply with a particular provision of the Code if it is not appropriate for them to do so, the reality is that the practices set down in the Code will be treated by most market participants (in particular proxy advisory firms and the media) as being the practices that companies must ascribe to, making them quasi-prescriptive in nature. This ultimately resulting in companies being less inclined to choose the practices that are most suited for their particular organisation, and instead treating the Code as a corporate governance check-list.
  • Company Directors cautions against the introduction of further principles without there being sound governance reasons to do so. A matter should only be introduced as a requirement under the Code where there is a reasonable expectation that adopting the practice will lead to better corporate governance and a better outcome for investors.
  • The significant concerns that have arisen with respect to executive remuneration in recent years almost exclusively involve companies in the financial services industry. In our view, there is no real evidence to suggest that further requirements regarding executive remuneration need to be introduced into the Code to regulate companies outside the financial services industry.

Download the submission (PDF 126 KB).

Download our document Executive Remuneration, Guidelines for Listed Company Boards (PDF 2 MB).