§ Mr. MillerTo ask the Secretary of State for Trade and Industry how he intends to take forward the proposals in his Department's consultative document on directors' remuneration. [152845]
§ Mr. ByersMy Department received 140 responses to its consultative document on directors' remuneration. Most respondents supported the Government's proposals to promote a more effective linkage between performance and boardroom pay. The Government have now decided to introduce secondary legislation under the Companies Act 1985 which will require quoted companies incorporated in Great Britain to publish a report on directors' remuneration as part of the company's annual reporting cycle. Companies will be required to disclose within the report details of individual directors' remuneration packages, the role of the board's remuneration committee and the board's remuneration policy, including information on performance linkage, directors' service contracts and compensation payments.
The Government recognise that it is also important that directors are accountable to shareholders in this area, not least because boards of directors face a conflict of interest in relation to directors' remuneration. The Government continue to be concerned that many quoted companies are failing to respond adequately to the best practice recommendations on accountability, but they are also aware that the Company Law Review is looking at a number of issues in adjacent areas. I will therefore take a final decision on how to improve accountability on boardroom pay, including whether or not to introduce a compulsory vote on the board's remuneration report, in the light of the Review's wider recommendations on company law reform.
Ahead of this there is of course nothing to stop institutional investors taking action now. I have had helpful discussions with the Association of British Insurers and the National Association of Pension Funds and with some of their members about the action they are taking to improve compliance with best practice in this area. In particular, I will be looking to see further evidence that:
remuneration committees are composed exclusively of independent non-executive directors;companies are complying with the spirit of existing best practice on accountability and that shareholders are fully involved.