Following responses from accountants, institutional investors, companies, trades unions and others to the DTI consultation paper, Rewards for Failure published in September 2003, Hewitt said the recent examples of increased activism by institutional investors, and the promotion of best practice had the potential to remedy the situation.
‘The government should wait to see the effect of these developments before it considers legislative remedies,’ she added.
Hewitt specifically ruled out legislation of the type introduced by Archie Norman, MP for Tunbridge Wells, in his company directors’ performance and compensation bill.
‘The overwhelming view of the respondents to the consultation was that this would be wholly unworkable in practice for a number of reasons: It would interfere with the operation of existing contracts; create a large degree of unnecessary uncertainty and complexity in the negotiation of new contracts; would be incapable of taking account of the wide range of recruitment circumstances; act as a deterrent to the recruitment of good quality directors; and could potentially lead to lengthy litigation which would be costly to shareholders.’
She the directors’ remuneration report regulations, introduced in 2002, already require plcs to produce a detailed annual directors’ remuneration report and to submit it to shareholders for approval at the annual general meeting.
A detailed assessment of compliance with this regulation will be implemented during this year’s AGM season, and an assessment of changes in remuneration practices will be made.
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