Directors' remuneration: Is the Enterprise and Regulatory Reform Bill paving the way for shareholders' voting rights?

Directors' remuneration: Is the Enterprise and Regulatory Reform Bill paving the way for shareholders' voting rights?

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Author: Emma Grant

Over recent months, we have reported that the Government is considering changes to the corporate governance framework on directors' remuneration

The first of those changes is now proposed through the Enterprise and Regulatory Reform Bill 2012-13, published on 23 May.

But have any of the Government's consultation proposals found their way into the Bill?

The most recent consultation, which closed on 23 April, proposed to give shareholders of UK-incorporated quoted companies greater influence on the issue of executive remuneration, through enhanced voting rights. This included giving shareholders an annual binding vote on remuneration policy.

The Bill proposes the deletion of section 439(5) of the Companies Act 2006, thus removing the statutory provision which prevents a person's entitlement to remuneration being conditional on the shareholders' approval of the directors' remuneration report.

The deletion of section 439(5) does not in itself give shareholders that binding vote, and the explanatory notes to the Bill recognise this.

However, the repeal would allow companies to give shareholders this specific power by amending their articles of association by special resolution.

At present, it is unclear whether the Government will actually follow through with its original proposals to mandate a shareholder binding vote on directors' remuneration.

However, a footnote in the BIS press release announcing the Bill states that the Government aims to clarify how its proposals to give shareholders binding votes on directors' remuneration will work in practice.

So watch this space.

In the meantime, the Bill is making its way though both Houses of Parliament and you can track its progress here.