Britain targets executive pay

Britain’s accounting regulator said it may overhaul rules for corporate pay and introduce measures to make it easier to seize executive bonuses.

The Financial Reporting Council may propose changes to the UK Corporate Governance Code that would also restrict who can serve as a non-executive director on remuneration committees. The proposals follow British legislation on the approval of executive pay, which went into force yesterday.

“The government’s new legislation underlines the importance of boards and investors engaging on directors’ remuneration,” FRC chairwoman Sarah Hogg said. “The FRC is undertaking this consultation to understand if there is a case for changes to the code.”

Regulators and government have pondered for more than a year on ways to better align remuneration with company performance and hand more power to shareholders. The FRC said it will look at bonus clawback arrangements, executives sitting as non-executives on peer remuneration committees, and steps to take when pay is not agreed by majority vote.

“Institutions have already taken a harder line on clawbacks in recent years, so any changes would be a catch-up with existing good practice,” said Carol Shutkever, a lawyer at Herbert Smith Freehills LLP. “That individuals who are already executives may not be able to sit as non-executives on another company’s remuneration committee would not, I think, be the right way to go.”

Industry groups can offer their views on the changes and no new rules would take effect before Oct 2014.

- Bloomberg