Partner Article

Three-yearly binding votes on executive pay announced

The Business Secretary is set to announce plans to force companies to have binding votes on executive pay every three years.

Following the vote companies will be required to stick to the same pay plan for the following years or have another shareholder vote. They will also be required to show how much an executive will be paid if they are sacked or quit.

Shareholders are currently able to vote on executive pay packages each year, but their votes are not binding, so any decision can theoretically be ignored.

While some are disappointed that the vote will not happen annually, it is believed that the three year cycle was chosen to ensure that it is a more forward-looking activity rather than retrospective.

Spekaing to the BBC Today programme, Gavin Oldham , chief executive of retail stockbroker The Share Centre said: “Because to set up retrospective issues between executive directors and boards as a result of a shareholder vote would just lead to legal battles and nobody wants that.

It is currently difficult to see how much executives take home because the remuneration section of annual reports are immensely long, complex and woolly, especially with regards to earnings from large and important long-term incentive plans.

This was posted in Bdaily's Members' News section by Ruth Mitchell .