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Make executive pay packages subject to annual votes by shareholders

The next Conservative government will legislate to make executive pay packages subject to strict annual votes by shareholders…

Our Verdict

Executive pay packages is one of the areas the the government has been consulting on in order to restore public trust in business. This promises focusses on executives in publicly listed companies (meaning companies that trade their shares on the stock market) .

Before this government’s term of office a ‘corporate governance’ consultation had already been launched, and one of the options for reforming executive pay was to make “all or some elements of the executive pay package subject to a binding vote”.

When this government responded in August 2017, their report found that this option was only backed by a third of respondents, whereas “most supporters of new powers felt that this would be disproportionate, given that only a relatively small number of
companies have experienced significant shareholder dissent on pay in recent years”.

As a result, the Financial Reporting Council, who is responsible for regulating corporate governance in the UK, did not include this measure in the updated 2018 Corporate Governance Code.

On this basis, given the government specifically promised to make executive pay “subject to strict annual votes by shareholders” and with no further corporate reforms in progress, we can conclude that this policy is ‘broken’. If further reforms are introduced before the government’s current term of office we’ll update this page. Follow this policy for updates.

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