Wishing all our clients a successful and prosperous 2019

Regardless of what happens concerning the UK’s continuing relationship with the rest of Europe as the PM seeks to re-open negotiations, life will continue, decisions will have to be taken, strategies formulated and business plans executed. It’s going to be a busy year. News of potentially the biggest ever gas discovery in the North Sea is good news for the energy sector and the jobs of those who depend on it – albeit amid warnings from environment groups that it is bad news for the climate.

The climate for executive remuneration is also changeable. The forthcoming AGM season promises to be lively. Numbers of listed companies will be submitting their future remuneration policies to a binding shareholder vote after a year which has seen the heat turned up on disclosures, executive pay levels and remuneration committee members, many of whom work diligently within a solid governance framework to ensure their remuneration policies are genuinely fit for purpose.

Remuneration Committee Chairs and committee members will need to prepare thoroughly for this year’s AGM season. A particular challenge will be the edict from the Investment Association that the pension contribution rate for executives must be aligned with the contribution rate for the majority of the workforce. This is the subject of an article in this Newsletter by my colleague, Mike Landon.

Last year, changes were made to the Directors’ Remuneration Reporting Regulations to strengthen the disclosure requirements required by law. The changes come into force for financial year-ends on and after 1 January 2019, which means that most companies will not be required to comply until 2020. However, numbers of companies are taking the opportunity of a dry run in this year’s Directors’ Remuneration Report, which will give them an opportunity to test the waters and to ensure that they are fully prepared for their reports in 2020.

Finally, MM&K has always advocated that remuneration policies and incentive plans in particular, should be designed to meet the specific requirements, business strategy, culture and philosophy of the company. A solid governance framework is essential to provide necessary checks, balances and disciplines but remuneration strategies work best if they are tailor-made.

Current code provisions and investor guidance appear to support this view but attempts by some companies to introduce plans which do not adhere to the norm have failed. There may have been good reason for this. I hope, however, that remuneration committees will not be deterred from adopting policies and plans which are demonstrably fit for the purposes of the businesses whose interests they serve – but which may not conform to a standard template. This will be a challenge for those who chair remuneration committees, who face both internal and external pressures and who must balance the interests of all stakeholders in the business.

Paul Norris

Chief Executive

paul.norris@mm-k.com

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