* Companies face banker-style clawbacks on bonuses
* Direct accountability for "going concern" statements
* Harder for companies to brush off shareholder concerns
By Huw Jones
LONDON, April 24 Britain's stock-market listed
companies should be able to claw back bonuses paid to poorly
performing executive board members, a regulator proposed on
Thursday, mirroring steps already being taken by banks.
The Financial Reporting Council (FRC) published how it plans
to toughen its corporate governance code, a set of standards
which companies must comply with or explain publicly why they do
The audit watchdog's move follows public anger over high pay
for bosses when most people have endured several years of
austerity and challenges by investors in 2012 frustrated at
boardroom salaries rising when share prices were declining.
Britain's business minister Vince Cable on Tuesday warned
banks and other major companies to rein in excessive and
disproportionate executive pay or face tougher rules.
Banks already have curbs on executive pay, brought in by
the European Union following the 2007-09 financial crisis. These
include requiring most of a bonus to be deferred over several
years, be partly paid in shares, and to be clawed back if
performance turns out to be poor. Bonuses paid from early 2015
will be capped at no more than fixed pay, or twice that amount
with shareholder approval.
Although less strict than the rules for banks, the audit
watchdog hopes its standards will encourage executive board
members to put a company's well-being before their own.
A public consultation on the proposals runs until June and
the rules are due to come into force in October.
"These proposals, which reflect the views of investors and
others on earlier consultations, are intended to encourage
boards to focus on the longer-term, and increase their
accountability to shareholders," Chief Executive Stephen
Haddrill said in a statement.
The watchdog wants to make a company's remuneration
committee more responsible for ensuring that executive pay is
designed with long-term success in mind, rather than short-term
gains that could encourage excessive risk-taking.
The proposed code says companies should put in place
arrangements so they can recover or withhold bonuses when, with
hindsight, performance turns out to be poor. Companies should
also consider minimum periods before an executive can cash in
parts of a bonus.
During the "shareholder spring" of 2012, some executive pay
packets were challenged, though not all successfully.
The regulator wants to make it harder for companies to brush
off critical shareholders.
Companies would have to explain when publishing voting
results at annual meetings how they will engage with
shareholders when a significant percentage of them have voted
against a resolution.
Barclays bank holds its annual meeting on Thursday
and faces some criticism that bonuses for investment bankers
rose last year despite a drop in profit.
Other changes proposed include requiring companies
themselves to say what could stop them staying in business for
the year ahead.
That task is currently left to the company's auditor to say
in the annual report whether it believes the firm can stay a
"going concern" for the following year.
Policymakers have questioned why banks were described as
going concerns in the run-up to the financial crisis, only to
need rescuing by taxpayers months later when markets turned
Firms would also have to "robustly" assess their main risks
and how they are managing them, rather than the current practice
of making generalised statements in annual statements to cover
The Institute of Directors lobby group welcomed the
"Although there is some evidence that the pace of executive
pay inflation at large listed companies has moderated during the
last year, this is an issue which continues to damage the
reputation of UK business," director of corporate governance Dr.
Roger Barker said in a statement.
(Reporting by Huw Jones; Editing by Erica Billingham)