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FTSE 100 companies react to remuneration disclosure regulation


More than three quarters of FTSE 100 companies have made changes to their remuneration arrangements in the past 12 months to address the UK government's new disclosure regulations, according to information published by Deloitte UK.

"This year we have seen an unprecedented amount of change to remuneration structures, undoubtedly prompted by more dialogue between companies and their shareholders following the new requirements on disclosure and voting," Deloitte remuneration team partner Stephen Cahill explained.

The government's remuneration disclosure reform came into force in October 2013. It requires quoted companies to disclose the director's remuneration policy and its implementation. The reform also specifies that the shareholders have a binding vote on a resolution to approve the directors' remuneration policy.

According to Deloitte UK, a third of companies did not increase salaries for chief executive directors as a possible result of the reform. Also, salary increases were modest with a median increase of 2.5% and fewer companies have given directors increases in excess of 3% (16% this year compared with 25% last year).

"Restraint has been particularly apparent in the top 30 companies where 44% of executive directors received no increase," Cahill added.

To align the interests of directors and shareholders, the companies also focus on increasing the shareholding requirements for directors and introducing simpler remuneration structures, Deloitte said.

Accordingly, a quarter of companies have increased the shareholding required by directors and in over a quarter of performance share plans, the participants will not receive any shares for five years.

"There is an expectation that directors will hold sufficient shares to create real alignment with shareholders," Cahill continued.

"In the past year we have seen over a quarter of companies increase the minimum requirements, resulting in a median requirement to hold shares with a value of 200% of salary, compared with 150% last year."

According to Deloitte, 13 companies removed the bonus share matching plan to simplify the remuneration structure and as for the bonuses, the median potential bonus and the actual bonus payout amount in the top 30 companies have decreased.

"A key expectation of shareholders is that companies will be able to claw back incentive payments and share awards where they were clearly inappropriate," Cahill explained.

"This is rapidly becoming normal and accepted practice and provisions allowing sums already paid to be recovered are now in place in over 40% of companies," he continued.

Most companies received a high level of support for both the remuneration policy and the annual remuneration report trough the shareholders binding vote, Deloitte stated, with 79% of companies received more than 90% of votes in favour of the remuneration report.

"Shareholders are taking a robust position where policies and practices are not considered to be in line with best practice," Cahill added.

Related article:

UK FRC canvasses opinion on directors' remuneration

Related link:

Deloitte UK

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