INSIGHT - DTI warning on executive remuneration.

The Department of Trade and Industry has made clear its displeasure with the level of quoted companies’ adherence with best practice on boardroom pay in a consultative document entitled Directors’ Remuneration, which was issued in July. It warns that “the current framework does not appear to be delivering the fundamental principles of accountability, transparency and linkage to performance”. Further regulation is threatened. The DTI thinks it may be necessary, for example, to require quoted companies to vote on a company’s remuneration report every year. The paper also includes a report by PricewaterhouseCoopers, which shows that only four companies out of almost 300 analysed chose to put their remuneration report forward for shareholder approval – seemingly in breach of Greenbury code principles that companies should consider each year whether it is appropriate to do so. Trade secretary Stephen Byers (left) says in the paper that “a significant contribution to improving our international competitiveness” will be made if remuneration packages “attract managers of the highest quality, motivate them to perform to their full potential, and are perceived to be fair”. The government is particularly keen to ensure that the link between pay and performance be improved by “amending” company disclosure requirements on such linkages. The DTI is also concerned about “rewards for failure” in excessive loss of office compensation. The consultative document is available on the DTI’s website at: https://www.dti.gov.uk/cld/ condocs.htm. Or it can be ordered via e-mail at [email protected]. Comments on the paper should be sent to the DTI by 29 October. See Editor’s Letter, page 5.