5 January, 2021
Q: During 2020, our company received Government support through the Job Retention Scheme. Our Remuneration Committee will be meeting in early 2021, what should they be considering in terms of the impact on Executive Pay?
A: Where companies received Government support through the Job Retention Scheme as well as any additional shareholder support, it is generally expected that this needs to be reflected in the outcomes on executive remuneration. Remuneration Committees need to ensure that executives are not detached from the impact of Covid-19 and should consider how employees, shareholders and other stakeholders have all been affected.
The Investment Association issued updated guidance on Executive Remuneration in November 2020 which stated that shareholders would generally not expect the payment of any annual bonuses for FY 2020 or FY2020/21 unless there are truly exceptional circumstances. The guidance indicated that they would not support Remuneration Committees adjusting performance conditions for in-flight annual bonuses or long-term incentive awards to account for the impact of Covid-19. The Committee may therefore need to be prepared to exercise its discretion to ensure the performance of the company and the experience of shareholders over the last year is proportionate to any outcomes on executive pay. The Investment Association acknowledged the challenge of balancing the need to incentivise executive performance at a time when significant leadership and resilience is needed with the experience of shareholders, employees and other stakeholders over the preceding months.
The Remuneration Committee’s report will need to disclose how it reached its conclusions on executive pay for the past year and ensure this ties into the s172 statement in the annual report.
If you need assistance with advising your Remuneration Committee, or with supporting your Board with corporate governance generally, please contact us. All our details are on our website www.brucewallace.co.uk
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