Thera Prins
UK Shareholder Services
We begin this month with a brief look at the simplified guidelines for executive remuneration which have been issued by the Investment Association.
The Chartered Governance Institute has issued its latest FTSE 350 Boardroom Bellwether.
The Financial Reporting Council has issued its latest Annual Review of Corporate Reporting along with an eight-minute video which discusses the key finding of the review.
The Financial Conduct Authority has issued Primary Market Bulletin 51.
Finally, Companies House have issued a series of reports on their approach to issuing financial penalties, information sharing measures in the Economic Crime and Transparency Act 2023 and their enforcement policy.
The Investment Association-Principles of Remuneration
The Investment Association (IA) has published a set of simplified guidelines for executive remuneration policies, in line with evolving practices in the market and investor expectations. The Principles set out the main areas that investors are interest in. There is flexibility to adapt pay structures to best suit the company’s business and strategy – they remain Principles, not rules.
The guidelines have been formed under three principles:
- Promoting long-term value creation.
- Supporting individual and corporate performance.
- Delivering remuneration clearly linked to company performance.
Notable revisions include:
- New guidance on hybrid long-term incentive structures, advising that, if proposed, companies should ensure compelling rational and supporting narrative.
- Greater flexibility on bonus deferral, opening up the opportunity to link the deferral requirement to the level of the executive’s shareholding.
- Presenting a more balanced model of positive discretion on incentive outcomes that can take into account broader performance.
- The removal of the requirement that limits executive share plans to 5% of share capital. There is also additional guidance providing flexibility for high growth companies.
- Although the Principles continue to caution on the use of benchmarking, it clarifies that, where benchmarking is used, the guidance on disclosure has been expanded.
The IA stresses that each company should adopt a structure that makes sense for its own business and the market sector that it operates in.
The Principles can be viewed here: Principles of Remuneration 2025 - Final.pdf (theia.org)
Chartered Governance Institute – FTSE 350 Boardroom Bellwether September 2024
The FTSE 350 Boardroom Bellwether is an annual survey by the Chartered Governance Institute that seeks to gauge the sentiment inside British boardrooms to find out how boards are responding to the challenges of the economy, market conditions and the wider business and governance environment.
The report outlines the key findings of the latest survey, which took place in June and July 2024. Among other topics, it covers:
- Whether the UK’s biggest companies are expecting the global and UK economy to improve or decline.
- FTSE companies’ views on the UK’s longer-term competitiveness, relationship with the EU and government priorities for growth.
- Board diversity amongst the FTSE 350 – across gender, ethnicity, and socio-economic background.
- The biggest risk factors for UK business over the next 12 months.
- Net zero planning and the ability of boards to act on the issues.
- Views on the level or regulation and emerging use of generative AI in reporting methods for improving board performance and views on how effective they are.
The results include:
- 94% believe their board to be ethnically diverse. The deadline to meet the Parker Review target of at least one ethnic minority board member on every FTSE250 board is the end of 2024.
- 74% report their exposure to cyber risk will increase. 24% think it will remain the same.
- 94% of boards have either published detailed plans for net zero transition or have plans in development
- 53% of boards view rules and scrutiny over executive pay to be detrimental to hiring the right candidates. 29% do note.
The full report can be accessed here: 2024-boardroom-bellwether_final.pdf (cgi.org.uk)
The Financial Reporting Council – Annual Review of Corporate Reporting
The Financial Reporting Council’s (FRC) Annual Review of Corporate Reporting sets out the findings of its monitoring of FTSE250 companies annual reports and its expectations for the upcoming reporting season.
Key findings of the report:
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The quality of FTSE350 reporting has been maintained and there have been improvements in several reporting areas.
Disappointment on the increase in the number of restatements to impairment of assets and cash flow statements. These will remain areas of focus for the FRC.
- #There were comparatively few issues in premium-listed companies’ reporting against the TCFD framework.
The number one issue identified was impairment of assets where companies should ensure they provide adequate disclosures about the key inputs and assumptions used in their impairment testing, including justifying the use of financial budgets/forecasts for periods longer than five years. Issues relating to the strategic report and the Companies Act 2006 were rated at number six where companies should ensure that the strategic report provides a fair, balanced and comprehensive review of the company’s development, position, performance and future prospects. This should include unbiased discussion of positive and negative aspects of performance, a clear articulation of the effects of economic uncertainty on the business, and should address significant movements in the financial statements, including those in the cash flow and balance sheet.
The full report can be accessed via this link: Annual Review of Corporate Reporting 2023 24 (frc.org.uk)
There is an accompanying eight-minute FRC In Conversation podcast discussing the key findings available here In Conversation: The FRC’s Annual Review of Corporate Reporting 2023/2024
Financial Conduct Authority – Primary Market Bulletin 51
The latest edition of the Primary Market Bulletin provides feedback on the Financial Conduct Authority’s consultation and subsequent changes to the Knowledge Base on the Listing Regime. It also provides reminders of the deadline for commenting on the planned improvements for the National Storage Mechanism which expired on 27 September 2024 and the deadline for responding the discussion paper Opportunities for the Future of Digital Reporting (1 November 2024)
The full bulletin can be accessed from: Primary Market Bulletin 51 | FCA
Companies House
Companies House has published a number of updates in connection with the Economic Crime and Corporate Transparency Act 2023. The updates cover the following:
Approach to Financial Penalties
This document has been published to explain Companies House’s approach to financial penalties issued under the Economic Crime and Corporate Transparency Act 2023 (Financial Penalty) Regulations 2024.
The approach to financial penalties addressed by the document include:
- When Companies House can issue financial penalties.
- Warning notices and penalty notices
- Making a representation.
- How Companies House calculates penalties.
- Penalty amounts.
- Paying a penalty.
- Appealing a penalty.
- What happens if a penalty is not paid.
The full document can be accessed here: Companies House approach to financial penalties - GOV.UK (www.gov.uk)
Information Sharing Measures in the Economic Crime and Corporate Transparency Act 2023
Companies House has published guidance that provides details on where the Economic Crime and Corporate Transparency Act 2023 allows direct and indirect sharing of information between businesses in the anti-money laundering regulated sector in order to prevent, detect and facilitate the investigation of economic crime.
The guidance includes detail on:
- Provisions to ensure that businesses abide by the new measures.
- Practical considerations for businesses including mechanisms for cross-sector sharing.
- Requirements for law enforcement reporting, UK GDPR compliance and customer redress.
The guidance can be accessed via this link: Guidance on the information sharing measures in the Economic Crime and Corporate Transparency Act 2023 - GOV.UK (www.gov.uk)
Enforcement Policy
This policy statement sets out Companies House’s approach to how they will take action to enforce the law when non-compliance or breaches are identified.
In addition to providing advice and published information, the enforcement methods available include:
- Imposing financial penalties.
- Civil actions, for example, court ordered filing of documents.
- Criminal prosecutions.
- Asking the courts to disqualify people from being company directors.
This has been published to ensure the principles and approach to enforcement are clear and when there is a requirement to refer cases to other agencies, such as the Crown Prosecution Service, Insolvency Service or the relevant Scottish or Northern Irish agencies.
The policy can be viewed here: Companies House enforcement policy - GOV.UK (www.gov.uk)
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