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The council, which administers financial reporting rules in the UK, has said that the salaries of top staff at firms in the country should be geared towards the long term – to better support future growth and prosperity of their companies and staff.
Updated Governance Code
In practice that would mean longer periods of deferral before they received their full remuneration. The FRC also see the proposals as instigating a shift from cash bonuses to shares and stocks, further contributing to a long-term vision.
The new rules were issued on Wednesday by the FRC under its UK Corporate Governance Code. The updated code said:
“Boards of listed companies will need to ensure that executive remuneration is aligned to the long-term success of the company and demonstrate this more clearly to shareholders,
“Executive directors’ remuneration should be designed to promote the long-term success of the company. Performance-related elements should be transparent, stretching and rigorously applied,”
The code is enforced through a ‘comply or explain’ process, whereby companies not complying with the rules have to provide supporting evidence of how they ensure good governance instead.
The updated rules, which has also asked firms to introduce processes allowing for pay to be recovered if deemed necessary, apply to all 916 ‘premium-listed’ UK companies.
