UK Won't Curb Directors' Pay, Says Hewitt

by Robin Pilgrim, LawAndTax-News.com, London

27 January 2005

In a written statement delivered to Parliament on Tuesday, following the publication by the UK Department of Trade and Industry of new research, Trade and Industry Secretary, Patricia Hewitt revealed that the government does not plan to include new provisions on directors' remuneration in the forthcoming Company Law Reform Bill.

"Today's report shows that the regulations we introduced in 2002 have delivered a substantial change in behaviour. We are now seeing higher levels of compliance by top British companies, improved disclosure of directors' pay and rewards and better engagement with shareholders," she announced, continuing:

"The UK now has a corporate governance framework for directors' pay that leads the world in terms of transparency and accountability. While we are not complacent, we believe that a combined approach that develops best practice, underpinned by legislation, is the best way to tackle this issue."

According to Ms Hewitt the report, compiled by Deloitte & Touche, found a significant increase in the levels of compliance with the Directors' Remuneration Report Regulations. The research showed a rapid and almost complete reduction in directors' notice periods to one year or less, and high disclosure standards of 80% or more in 19 out of the 22 areas covered by the regulations.

In addition, the accounting firm found that there was growing investor satisfaction with improved disclosure on director's pay and awards, and better communication and engagement between shareholders and companies.

It concluded by observing that since the introduction of the tougher corporate governance regulations, many firms have adjusted their remuneration policies and practices to reflect the link between pay and performance.

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