A three-pronged offensive is being launched forcing companies to lift the lid
on the practices used to calculate top executives’ pay in their annual reports.
Finance chiefs are among the highest paid earners on corporate boards, but
the grey area surrounding how remuneration committees work out the reward
structure has frustrated investors.
The lack of clarity relating to executive pay formulas, which can include
highly intricate share, pension and incentive schemes has been studied by
PricewaterhouseCoopers, CIMA, and corporate reporting consultants Radley Yeldar.
In releasing its Report Leadership paper this week, the trio unveiled efforts
designed to help companies draw the sting from the reporting of executive
David Phillips, senior corporate reporting partner at PwC, said: ‘Executive
remuneration is one of the most heavily-scrutinised parts of the annual report.
Going into the AGM season, an enormous and disproportionate debate surrounds it,
fuelled largely by complexity, opacity and sometimes a touch of envy. This
needn’t be the case.’
The group believed that ‘all too many’ remuneration reports provided the bare
minimum required by standard setters, alienating investors. The reports also
needed to give a clearer picture of how, if at all, below-par performance hit
According to the group, explanations must be provided on how the remuneration
committee has spent its time during the year, how it has arrived at its
decisions and most importantly, how it is continuing to refine the alignment of
executives’ interests with those of shareholders.
Charles Tilley, chief executive of CIMA, added: ‘Clearly picking the KPIs and
linking them appropriately to executive remuneration is very important but, when
done effectively and reported clearly and transparently, [reports] should help
to remove the aura of mistrust that surrounds this emotive subject.’
The Financial Reporting Council has issued guidance regarding the annual reporting of 1,200 large and smaller listed companies. The letter highlighted the key issues and improvements that can be made in the 2016 reporting season
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Smith & Williamson has added Jim Clark and Philip Marsden, of Marsden Clark Corporate Finance Limited, to its corporate finance team.