The final draft regulations to implement the UK government’s new executive remuneration disclosure rules were laid before the UK Parliament on 24 June 2013 and are expected to come into effect from 1 October 2013, for reporting years ending on or after 30 September 2013.
The regulations are the outcome of an extensive consultative process that saw several iterations of the regulations before achieving a reasonable consensus. The outcome of the process is particularly evident when comparing the new UK law with the current Australian law. That is:
· The UK disclosure law requires a total remuneration figure to be provided for each named person, whereas the Australian regulation does not
· The UK disclosures will parse remuneration into what is paid for performance and what is not paid for performance. The Australian regulation does not require this.
· The UK disclosures clearly show “realisable pay” based on performance to the financial year-end, and “pay granted” in the financial year, including future pay that may vest. The Australian regulation does not require this.
· The UK disclosures require future pay policy to be disclosed. The Australian regulation does not require this.
The main changes to the pay reporting regulations include requirements for companies to:
· Have separate ‘policy’ and ‘implementation’ sections within the Directors’ Remuneration Report
· Subject pay policy to a legally binding shareholder vote at least once every 3 years
· Subject the implementation report to a separate annual advisory shareholder vote
· Report all elements of directors’ pay in a single, cumulative figure (the regulations define how this should be calculated so that all companies are consistent in their approach)
· Provide improved disclosure on the performance conditions used to assess variable pay for directors
· Disclose the level of awards that could be paid for various levels of performance, so that pay information is presented in a clearer format.
The final regulations vary from earlier drafts by extending the exemption that allows companies not to disclose commercially sensitive information in relation to performance measures and targets from certain specified disclosures to all remuneration disclosures. Our article on the first draft of the regulations is available HERE.
The final draft of the Large and Medium-sized Companies and Groups (Accounts and Reports) Amendment Regulations as laid before Parliament can be found HERE.
Information on the consultation in relation to the revised remuneration reporting regulations from 2012 can be found HERE.
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