Executive Pay Matters - Uk

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Executive Pay Matters - UK Risky Remuneration 2017 will mean renewal of executive remuneration policy for most listed companies. Whilst that may seem like a considerable time away, in order to have draft proposals ready for shareholder consultation in October (or earlier if you want to avoid the rush for investor attention), turning your mind to your policy review once this year 's DRR is published may make a whole lot of sense. But how do you know where to start? An increasing number of client companies are undertaking a risk assessment of their executive remuneration programmes on the basis that it will form the initial step in the overall remuneration policy review in 2016. A holistic assessment of risk in your policy can…show more content…
- Is remuneration aligned with long-term business strategy? 2. Remuneration policy - Using ‘best fit’ and prevailing market practice, can remuneration policy be strengthened to mitigate risk and increase strategic alignment? 3. Remuneration structure - Is there a good balance between fixed and variable pay, short and long-term objectives? - Are post-employment arrangements in place to reduce risk, such as retirement and termination provisions? 4. Pay plan design - Do the features of the pay plan, such as performance calibration, the degree of discretion, the shareholding requirements and the clawback/malus provisions, encourage excessive risk-taking? 5. Performance metrics - Do the performance metrics reflect the reward for effective risk taking and successful execution of strategy, e.g. is it absolute or relative performance that is rewarded? 6. Governance - Is there effective governance in place? - Are the roles to effectively manage remuneration clearly defined? In order to assess the nature of risks in each category, judgment needs to be applied. Such judgement should be informed by market pay knowledge, an understanding of shareholder views, an appreciation of the company 's business strategy and KPIs, and an analysis of recent pay out history. What questions do you need to ask? There are many risks related to remuneration - some of which are obvious (compliance risk for example) and others which are more difficult to identify,
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