§ Lord Vinsonasked Her Majesty's Government:
Whether they will take steps to require quoted companies' annual reports to summarise all directors' contracts in addition to the existing requirement for contracts of at least five years to be approved at their annual general meetings.
§ The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)At present, the details of directors' service contracts over one year are, with some exceptions, required under the Companies Act 1985 to be made available for inspection by shareholders. Aggregate figures for directors' emoluments, including amounts paid under service contracts, together with the individual figures for the chairman and any more highly paid director, must be set out in notes to the annual accounts. These include pension benefits and payments in compensation for loss of office. For quoted companies, Stock Exchange listing rules require the directors' report to show whether there are any service contracts and the unexpired period of any such contracts over one year.
Shareholders, who can dismiss the directors, and whose approval is required for service contracts of more than five years, therefore have access to relevant information. It would be impractical for companies to include full details of all contracts in annual reports; and, given the significance of detailed terms and conditions, it is unlikely that shareholders could rely on summaries of contracts.