Assume brace position: RemCom season is upon us again. And now with added complexity, thanks to recent changes to the UK Corporate Governance Code.
After months of consultation, a revised edition of the Code (UKCGC) was published on 16 July 2018, by the Financial Reporting Council (the UK’s independent corporate governance, accounting and audit regulator). The full text can be accessed here.
It’s a hefty read. But don’t worry, we’ve done hard work for you.
In a 2-part series, we’ll take you through a handy summary of the key changes, primarily as they relate to the operation of a Remuneration Committee. This week, we’re focusing on the introduction of Executive (CEO) Pay Ratio Reporting and its implications for the wider business.
We’ve outlined the detail of this new reporting requirement in another blog here. If you haven’t already familiarised yourself with the key aspects, do take a look. And while it may now be on your radar, it is worth looking at some of the wider implications of this upcoming requirement.
Impact on Pay Decisions
How will this additional reporting impact your current executive pay process? Given this figure needs to be reported in your annual report, how does the timing of that report tally with the timing of when executive pay decisions are usually undertaken in your organisation? Does that need to change?
The Benefits of Early Reporting
Although companies are not required to report the ratio until early 2020 (ie the annual report covering the 2019 financial year), it is worth considering whether to act earlier than this. There are two potential advantages to acting earlier.
- Positive PR approach: With Gender Pay, many companies learned the hard way that media attention was high. I can only assume that the same will apply here. Reporting ahead of the legal deadline will enable you to get on the PR front foot, and even be in a position to take action and compare progress against the previous year, as well as generate an important positive narrative.
- Understanding skew factors: The Exec Pay Ratio can be skewed by a wide range of factors. Understanding whether these apply to your business sooner rather than later will enable you to prepare appropriate messaging.
Cohesive Messaging
It is important to consider how to align the strategic narrative in support of your Gender Pay Reporting, with the required narrative to explain the Executive Pay Ratio. The need for a cohesive approach may require a change in who takes responsibility for each of activities going forward, and may require consideration by the Remuneration Committee.
Next week, we’ll look at another significant update to the Corporate Governance Code and focus on Board Effectiveness Guidance. In the meantime, if you’d like to get in touch about Exec Pay, please email gemma.bullivant@innecto.com or call 020 3457 0894.
RemCom Sprint
We’re running a morning coaching session on 16th October and 7th November at the Shard. These sessions are designed for HR Directors and Heads of Reward who are responsible for Remuneration Committees and looking to develop a combination of expert technical advice and negotiation skills.
For more info and to sign up, visit the event page
Delivered by experienced RemCom coach and Chair of Rem Deborah Rees-Frost, these short but highly structured sessions offer a great return on your time investment, and are accredited as Chartered Professional Development.
After completion, you will be able to handle complex situations with confidence, and add value to your RemCom and Board.
