Exec pay regulations come into force

The new regulations, which require companies explain the payments that executives receive, are effective from 1 January 2019 and apply to large UK listed companies with over 250 employees, with the first disclosures required from 2020

From 1 January 2019 the UK’s biggest companies are required to disclose and explain the gap between the pay received by senior executives and that of the average worker. Companies will have to provide the ratio of their CEO’s pay to that of the median, lower quartile and upper quartile pay of their UK employees.

Additionally, the regulations also require all large companies to report for directors take employee and stakeholder interests into considering when making business decision, and make it a requirement that large companies report their corporate governance arrangements.

The regulations also modify the reporting requirements set out in Companies Act 2006 (CA 2006), providing a new requirement to include a statement in the strategic report on how the directors have complied with s172, which requires that the director of a company must act in a way they consider to be most likely to promote the success of the company.

2018 saw a series of investor revolts at companies such as Royal Mail, Unilever, Cineworld and Persimmon over the pay of senior executives.

According to business secretary Greg Clark, ‘Britain has a well-deserved reputation as one of the most dependable and best places in the world to work, invest and do business and the vast majority of our biggest companies act responsibly, with good business practices.

‘We do however understand the frustration of workers and shareholders when executive pay is out of step with performance and their concerns are not heard.

‘These new regulations are a key part of the wider package of corporate governance upgrades we are bringing forward as a government to help build a stronger, fairer economy that works for businesses and workers.’

Report by James Bunney

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