A View from the Remuneration Committee: Emerging Good Practice in the UK

Alan M. Judes

Some of the largest collapses in firms and share prices during the financial crash of 2007–08 took place in organisations where top management held very significant shareholdings. A simple mantra of paying executives in the form of deferred shares would not have prevented the problems from occurring. The remuneration committee needs to take into account the link between culture and remuneration policies in designing the reward strategy. Risk is on the agenda for the remuneration committee more than at any other time. This chapter therefore considers the formation of the remuneration committee in the UK, its responsibilities to set policy for the company as a whole and the actual pay of the executive directors, how the Association of British Insurers (ABI) and Financial Reporting Council (FRC) have extended the requirement to consider risk in remuneration policy from the financial services sector to industry generally, how remuneration committees are dealing with their responsibilities and challenges, and how the concept of clawback is being significantly extended.

THE HISTORY AND ROLE OF THE REMUNERATION COMMITTEE

The remuneration committee is a sub-committee of the board of a

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