PwC comments on the Government's announcement on executive remunerationFollow @PwC_Midlands
Rupert Hutton, reward expert at PwC, said:
“The good news for business is that the Government has listened to their main concerns by setting the binding vote threshold at 50% and including termination payments within future policy rather than as a separate vote. This is a much more workable solution and should help reduce the burden on companies. It is encouraging that the proposals help support UK businesses by allowing them to operate in agreed guidelines, rather than being overly prescriptive.
"Reducing the vote to every three years, or annually if changes to the remuneration policy are made, is a sensible move. It may cause remuneration committees to benchmark less frequently which could reduce the inflationary effect of pay comparisons.
“It is questionable whether the proposals will lead to a wholesale reduction in executive pay. As recent events have shown, investors already have the tools to hold companies to account on pay and the new proposals don't add that much.
"There's a risk that expectations have been raised that won't be met. Many UK companies operate in a global market and can't just ignore that. But if pay doesn't fall, the Government may come under pressure to have another go in a year or two.
“We are still awaiting the detailed legislation to go through parliament, so as always the devil will be in the detail.”