Lord Mendelsohn – 2016 Parliamentary Question to the Department for Business, Innovation and Skills

The below Parliamentary question was asked by Lord Mendelsohn on 2016-04-25.

To ask Her Majesty’s Government whether they track executive pay; and whether they collect data on what percentage of Long Term Incentive Plans were changed for FTSE 100 companies when performance changed negatively.

Baroness Neville-Rolfe

Executive pay has risen significantly since 1998 and the link between top pay and company performance has sometimes been weak. That is why the executive pay reforms brought in by the Government in 2013 included measures to clarify the links between pay and performance as well as giving shareholders a stronger say. Company remuneration policies (on which shareholders now have a binding vote at least every three years), for example, must include information on how directors’ pay is linked to different levels of performance. In addition, the Annual Remuneration Report, which sets out what directors have been paid in the past financial year, has to set out clearly how the actual payments made relate to performance.

It is too soon to form firm conclusions about the impact of the 2013 reforms. Executive pay is typically set on a three year cycle and the reforms have not yet reached their third anniversary. However, there is growing evidence from the current AGM season that shareholders are prepared to use the new powers, particularly where pay is out of line with company performance.

The Government does not track executive pay across the more than 1,000 companies subject to the Regulations. We do however work closely with independent researchers that regularly survey the level and structure of pay, such as Manifest, and with key stakeholders such as the Investment Association and the Financial Reporting Council to ensure that we have access to the evidence needed to keep executive pay under review.