UK - For the forthcoming 2002 proxy season, PIRC is launching a new enhancement to its corporate governance service by providing a rating of new directors' share incentive schemes and proposals to approve remuneration reports.
The overall aim of the remuneration rating service is to provide a clear assessment of the positive and negative features of any new share incentive scheme and/or remuneration report and to use this analysis to come to an overall assessment of the proposal, benchmarked against standards of best practice.
The key issues contributing to the rating will be:
* The performance targets required to be achieved for maximum and minimum payouts. A high rating will only be awarded where the highest payouts are dependent on performance which is substantially ahead of market expectations (in the case of a financial target) or in the top decile compared to a peer group, if used;
* The level of base salaries compared to industry peers and the total sums available for incentive rewards relative to salaries;
* The quality and depth of disclosure of remuneration figures, policy and performance targets;
* The length of directors’ service contracts (in the case of a remuneration report vote).
Alan MacDougall, PIRC managing director said Spiralling boardroom pay continues to be a hot-button issue for many shareholders. This means there is increasing institutional investor demand for more sophisticated methods of assessing directors’ pay. The new government proposals for a shareholder vote on remuneration reports in 2003 can only fuel this.
“But to fulfil their responsibilities, shareholders need the tools to be able to analyse and respond to pay proposals. Our new service will provide independent and objective analysis to enable investors to reach an informed voting decision.
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