Towers Watson

UK Government Announces New Initiatives on Executive Pay

By Katharine Turner, Richard Latham and Tamsin Sridhara

On January 23, Vince Cable, the Secretary of State for Business, Innovation and Skills, announced the UK government’s response to its consultation paper on changes to the way in which executive remuneration is reported and its discussion paper on executive remuneration more broadly. 

The specific proposals, while not incorporating all of the initial ideas in the government’s consultation paper, are perhaps more extensive than expected and include some ideas not in the original consultations. They certainly do not lighten the regulatory burden on companies, even taking into account that pay ratio disclosure and employee representation on remuneration committees are no longer on the agenda.   

In announcing the government’s response, Secretary of State Cable said it was clear from his conversations with business and investors that there was a disconnect between executive pay and business performance and that, while the government did not have a role in micro-managing businesses, it did need to step in to address this market failure. He then announced proposals in four areas:

• Greater transparency
• More shareholder power, including binding say-on-pay votes
• More diverse boards and remuneration committees
• Best practice to be led by business and the investor community.

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Katharine Turner is the leader of Towers Watson’s executive compensation practice in the UK and Richard Latham and Tamsin Sridhara are senior executive compensation consultants in Towers Watson’s London office. Email katharine.turner@towerswatson.com, richard.latham@towerswatson.com, Tamsin.sridhara@towerswatson.com or executive.pay.matters@towerswatson.com.