Remuneration governance – the UK example Perceived problems: Insufficient shareholder discipline Increases in bonuses and other awards even when the company was not performing Public mistrust of business Solution: New regime for disclosure and voting by shareholders

What new rules require – voting Binding shareholder vote every three years on remuneration policy Annual advisory vote on implementation Fresh vote on policy if implementation vote is rejected Annual re-election of directors remains in place What the new rules require – reporting Separate policy and implementation report Single figure for amount received by each director Statement by Remuneration Committee chair Information on company performance set against remuneration trend Statement of directors’ holdings and holding guidelines Details of termination payments Remuneration governance – the UK example

“A strong package of reforms” which would “restore the link between remuneration and performance.” Vince Cable, Business Secretary Expected benefits: Greater accountability of companies to shareholders Greater transparency in the operation of remuneration Limited discretion for companies to deviate from agreed policy = more discipline No government interference in the detail of pay

Remuneration Governance – the UK example Perceived shortcomings: Built around existing practice – stifles innovation Binding votes on policy create pressure for bland policy Excessive detail pushes up cost of compliance Does not address some key issues – how pay is valued Over-complex voting processes and excessive burden on shareholders = greater reliance on proxy voting agency advice No need for additional binding vote when directors can be dismissed Does not apply to companies listed in UK but domiciled abroad