UK: Executive remuneration – Enterprise and Regulatory Reform Bill presented to Parliament

The Enterprise and Regulatory Reform Bill, which will be used to introduce a binding shareholder vote on executive remuneration, has been issued and presented to Parliament. 

The only relevant provision in the draft Bill as it currently stands is the deletion of section 439(5) of the Companies Act 2006. Section 439 of the Companies Act requires quoted companies to seek shareholder approval for their directors' remuneration report and section 439(5) currently provides that an individual's remuneration does not have to be conditional on the passing of the resolution. The deletion of section 439(5) is intended to pave the way for new provisions allowing for a binding vote on directors' pay. 

BIS has published a factsheet on the directors' pay provision of the Bill, which states that BIS anticipates introducing further clauses into the Bill in relation to shareholder voting on executive remuneration later in the parliamentary process. This will be done once the responses to the consultation on enhancing shareholder power in relation to directors' pay have been considered and BIS has finalised the measures it wishes to take forward. (See our briefing on the consultation for more information.)  BIS hopes to announce its final proposals before the summer recess and to publish the draft regulations on reporting on remuneration at the same time.

BIS has set up a new webpage on the Enterprise and Regulatory Reform Bill, where a copy of the Bill, the accompanying explanatory notes and the factsheet on directors' pay are available.