The Financial Reporting Council (FRC) in the UK has published a consultation on whether to amend the UK Corporate Governance Code (the Code) to address a number of issues relating to executive remuneration.

The FRC announced last year its intention to consult after the UK Government’s legislation on voting and reporting on executive remuneration had been finalised. That legislation, which contains new requirements related to voting on remuneration policies and requirements regarding the information companies must disclose in their remuneration report, has now been enacted and came into force for companies incorporated in the UK for accounting periods beginning on or after 1 October 2013.

There are three main issues on which views are sought:

• Clawback provisions
  Whether the current Code requirements are sufficient around clawback arrangements or whether the Code should include a “comply or explain” presumption that companies have provisions to recover and/or withhold variable pay

• Remuneration committee membership
  Whether non-executive directors who are also executive directors in other companies should sit on the remuneration committee to avoid the perceived conflict of interest that may arise

• Vote against the remuneration report
  Whether there should be an explicit requirement in the Code to report to the market in circumstances where a company fails to obtain at least a substantial majority in support of a resolution on remuneration

As well as consulting on the three specific issues, the FRC has also asked respondents to highlight whether they feel that there should be any further changes to the sections of the Code relating to remuneration. Comments are requested by 6 December 2013. Any proposed changes to the Code will be subject to consultation in the first quarter of 2014 and, if adopted, would be applicable for accounting periods beginning on or after 1 October 2014.

Contributed by Susanne McMenamin.

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