The Department for Business Innovation and Skills (BIS) has published a research paper on companies’ compliance with the new directors’ remuneration reporting regulations (DRRRs) in the 2014 AGM season.
The research was carried out by Manifest, taking a random sample of 93 UK-incorporated companies listed on the London Stock Exchange. Thirty-eight of these companies had more than 20,000 employees, 38 fewer than 20,000 employees and 17 were small and medium enterprises (SMEs) with fewer than 250 employees. An assessment was made on a “pass/fail” basis whether the companies had provided the information required by the DRRRs. Voting results on remuneration policies and remuneration reports from the 2014 AGM season were also examined.
Overall, compliance of the larger companies in the sample was “very good indeed”:
- of the 19 requirements tested, there was a 100% pass rate for eight of them; and
- the score for a further seven requirements was 95-99% compliance, in other words only 11 “fails”. Unsurprisingly, most of these were by SMEs – there were five from one company alone.
There were only four areas in which compliance was not up to scratch. For three of these (pension entitlements, payments for loss of office and payments to past directors) it was thought that simply there was nothing to disclose on these items for those particular companies, in which case the report concludes that it would be better if there was a requirement to make a negative statement.
The most significant instance of non-compliance was with the DRRRs requirement to specify in the future policy table the maximum salary that may be paid (in monetary terms or otherwise). The report suggests that many companies may have followed the instruction in the guidance on the DRRRs issued by the GC100 and investor group “to describe the considerations the remuneration committee will take into account for increasing salaries during the remuneration policy period” rather than stating the maximum salary and explaining how they have set it. The report proposes an amendment to the guidance to clarify this.
In terms of voting on resolutions to do with remuneration, the report found that dissent was much greater (on average, by a factor of three) than for other types of resolution. Votes against have gradually increased over the last five years, with a peak in 2012 in “the shareholder spring”. Details of the voting results on remuneration for all FTSE100 companies in the 2014 AGM season can be found in our single-source document.
So with a few exceptions, BIS will be awarding gold stars all round ….