The report, Board Structure, Disclosure and Non-executive Directors’ Fees, says firms need to be more open and communicate better about how non-executive directors are hired and paid.
This is required in the Directors Remuneration Report (DRR) regulations, which came into force in August last year. It will also be a recommendation under the Combined Code, which comes into force on 1 November and is based on the recommendations of the Higgs report on corporate governance and the Smith report on audit committee reform, published earlier this year.
This code is not backed by legislation, but companies will have to explain why they do not comply with the guidelines if they have not implemented them by next month.
Of the 59 per cent of FTSE 350 companies that had published their annual reports since the DRR regulations came into force, the report found that only around half explained the importance of fixed and variable elements of directors’ pay packages.
Those that did comply often used only a vague statement.
‘We would encourage companies to see the new requirements as a real opportunity to provide investors with a better understanding,’ said Rupert McNeil, executive remuneration partner at Deloitte.
