Thompson, Steve --- "Executive Pay and Corporate Governance Reform in the UK: What Has Been Achieved?" [2012] ELECD 601; in Thomas, S. Randall; Hill, G. Jennifer (eds), "Research Handbook on Executive Pay" (Edward Elgar Publishing, 2012)

Book Title: Research Handbook on Executive Pay

Editor(s): Thomas, S. Randall; Hill, G. Jennifer

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849803960

Section: Chapter 3

Section Title: Executive Pay and Corporate Governance Reform in the UK: What Has Been Achieved?

Author(s): Thompson, Steve

Number of pages: 15

Extract:

3 Executive pay and corporate governance reform in
the UK: what has been achieved?
Steve Thompson


1 INTRODUCTION
The purpose of this chapter is to evaluate the consequences of corporate governance
reform on the remuneration and tenure of executives in the UK. The country has now
experienced 20 years of corporate governance reforms since the establishment of the
Cadbury committee in 1991. A consistent theme over this time has been the need to make
the employment contracts of senior executives, and particularly their remuneration
practices, more reflective of the interests of the shareholders they serve and to link execu-
tive rewards more closely to performance outcomes. This is explicitly formulated as a
principle of the UK Corporate Governance Code, which currently requires:

Levels of remuneration should be sufficient to attract, retain and motivate directors of the
quality required to run the company successfully, but a company should avoid paying more than
is necessary for this purpose. A significant proportion of executive directors' remuneration
should be structured so as to link rewards to corporate and individual performance. (Financial
Reporting Council, June 2010)

A battery of direct and indirect measures has been deployed to further these ends. These
include the progressive strengthening of the importance, independence and responsibili-
ties of non-executive directors, both absolutely and relative to the position of executives.
Successive versions of the Code have become increasingly more prescriptive about the
appropriate processes for determining executive rewards, structuring incentives, specify-
ing tenure and minimizing executives' influence on the setting ...