The Remuneration Consultants Group (RCG), the body established by the industry in 2009 to develop a voluntary Code of Conduct for executive remuneration consultants, has completed its latest review of the Code. The review was based on consultation with external stakeholders including Remuneration Committee chairs, institutional shareholders and other interested parties.
The review highlighted the continuing success of the Code in ensuring that advice provided to remuneration committees is independent and objective. More than half of listed companies now disclose that their advisers are signatories to the RCG Code of Conduct.Some changes to the Code have resulted from the review, including the need for consultants to provide clarity regarding the way conflicts of interest are being managed and to help clients establish a clearer connection between pay and performance in compensation programmes. The main changes cover:Management of conflicts of interest – consultingfirms will provide greater clarity on the procedures and processes they have put in place to manage and minimise any perceived conflicts of interest.Pay for performance –the Code now explicitly states that consultants will encourage clients to consider pay in the light of performance and business strategy.Clarity of disclosure – consultants will ensure that they continue to assist Remuneration Committees to take investors’ views into account and include this in the remuneration report to provide reassurance to shareholders.
Martin Read, Independent Chairman of the RCG, said: “I am pleased to say that the consultation was productive, helpful and informative. It was reassuring to hear from stakeholders that the Code is recognised as playing an important role in codifying and communicating the professional standards of remuneration consulting in the UK. “The role of remuneration consultants is better understood than it was a few years ago and shareholder bodies and remuneration committees are much more aware of the Code and increasingly recognise its value. “Stakeholders agreed that in assessing the independent and objective nature of the advice received, disclosure in the Directors’ Remuneration Report that the adviser is a signatory of the Code of Conduct provides a most helpful reassurance.”
This is the RCG’s second formal review of the Code which is carried out every two years among Remuneration Committees of UK FTSE 350 companies, institutional shareholders and other stakeholders of UK companies, trade associations, corporate governance experts, including the ABI and the FRC. The fully updated Code of Conduct can be viewed on the RCG website at www.remunerationconsultantsgroup.com
