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The Study Group Introduction 1. We have, however, operated independently of the CBI. But much of the discussion applies equally to other senior executives. Our work has also focussed on the larger listed companies whose remuneration packages have attracted most public attention. But the principles apply also to smaller listed companies. We hope that non-listed companies, too, will find our Report helpful. The Group was grateful to receive advice from a wide variety of organisations, including companies, shareholder bodies, the TUC and from individuals.
These have greatly assisted our deliberations. Public and shareholder concerns 1. Recent concerns about executive remuneration have centred above all on some large pay increases and large gains from share options in the recently privatised utility industries. These increases have sometimes coincided with staff reductions, pay restraint for other staff and price increases. There have also been concerns about the amounts of compensation paid to some departing Directors. Our own perceptions 1.
Much has been done in recent years to raise standards and improve procedures for this and other aspects of corporate governance.
Specialist consultants have advised us that, for the most part, remuneration levels for Directors in the UK lie within the range of European practice and well below American levels.
We also believe there to be a key issue about performance which has received too little attention in the public discussion. It is vital that this improvement should continue. But the performance of our companies depends to an important extent on the Directors and senior executives who lead them. The remuneration packages UK companies offer must, therefore, be sufficient to attract, retain and motivate Directors and managers of the highest quality.
Nevertheless, we fully understand the concerns which shareholders, employees and the public have expressed in recent times about executive remuneration and compensation payments. There have been, in our view, mistakes and misjudgments. We also accept that, since Boards of Directors face a potential conflict of interest when determining their own remuneration, there are important issues about accountability that need to be addressed.
The way forward Introduction 1. The way forward as we see it lies not in statutory controls, which would be at best unnecessary and at worst harmful, but in action to strengthen accountability and encourage enhanced performance. Such action should build on progress already made. This is the approach which underlies the proposals in our Report for remuneration committees of Non-Executive Directors, annual reports to shareholders and full disclosure.
In our view these fundamental principles of accountability, transparency and performance, and the related! The new Code should subsume and replace the considerable number of existing codes and guidance notes on the subject. Our proposed Code is in section 2. Section 3 contains our recommendations for action.
Sections 4 to 7 elaborate and discuss the Code. Section 8 discusses its application to the privatised energy and water companies. We propose that all listed companies registered in the UK, and others too as they see fit, should comply with the Code and report annually to shareholders about their compliance with it, as provided in section 2, paragraph 2.
We ask the London Stock Exchange and the investor institutions to use their powers and influence to ensure that this happens. Our specific proposals are in section 2, paragraph 2.
The Greenbury Report on directors’ remuneration
Download the Turnbull Report updated version with revised guidance PDF These guidelines were put together by the Institute of Chartered Accountants at the request of the London Stock Exchange in order to inform directors of their obligations toward internal control as specified in the Combined Code. Review of the Role and Effectiveness of Non-Executive Directors Higgs Report - Download the Higgs Report PDF It was wondered, in the aftermath of the Cadbury Report, where the abundance of talented and conscientious non-executive directors that the system relied upon might come from, and this was still a subject of concern ten years later. The Higgs Report, commissioned by the UK Government to review the roles of independent directors and of audit committees, has a slightly different flavour from those preceding it, and while it too rejects "the brittleness and rigidity of legislation" it is certainly more prescriptive and firm in its recommendations, aiming to reinforce the stipulations of the Combined Code. Specifically the Report proposes that: at least half of a board excluding the Chair be comprised of non-executive directors; that those non-executives should meet at least once a year in isolation to discuss company performance a move away from the clear preference for unitary board structures displayed elsewhere ; that a senior independent director be nominated and made available for shareholders to express any concerns to; and that potential non-executive directors should satisfy themselves that they possess the knowledge, experience, skills and time to carry out their duties with due diligence. Elements of these recommendations were duly compiled by the Financial Reporting Council and released as Good Practice Suggestions from the Higgs Report PDF in June , but the bulk of the suggestions have not as yet been formally incorporated into the Combined Code though the suggested proportion of non-executive directors on the board was raised from "not less than a third" to half in the version. For more information about this archive or to enquire about access to original documents, please: Contact us.
Greenbury Report (Study Group on Directors' Remuneration)
The Study Group Introduction 1. We have, however, operated independently of the CBI. But much of the discussion applies equally to other senior executives. Our work has also focussed on the larger listed companies whose remuneration packages have attracted most public attention. But the principles apply also to smaller listed companies.