Press Release: Government Proposals on Directors’ Pay should be “taken back to the drawing board”

Responding to Vince Cable’s proposals for new reporting regulations on Directors’ Pay, UKSA’s points out that they take no account of the Kay Review, yet that Review was commissioned by Vince Cable himself.
Professor Kay has highlighted the way in which current bonus systems lead to short-term policies. He wants incentives to be provided only by company shares, which must then be held at least until the executive has retired from the business. Despite the importance of these proposals, new reporting regulations have been prepared which ignore them. UKSA says these draft regulations should be taken back to the drawing board.
UKSA has discovered that Vince Cable’s department of Business Innovation and Skills (BIS) took no account of the impending publication of the Kay Review when drafting the new regulations for company remuneration reports. Their preparation was seen as entirely separately from any action arising from the Kay Review, even to the extent of having separate teams working on these two key initiatives.
Adopting the draft regulations, issued for a consultation period ending one week from now, would simply entrench current practices, whereas major change is needed. Now that we have the benefit of the Kay Review, the draft regulations must surely be withdrawn and detailed thought given to what approach by Government will best help it achieve what Professor Kay has recommended.
Introducing UKSA’s response to the draft, Eric Chalker, UKSA’s Policy Co-ordinator, said:
“The proposed regulations would entail a mass of immensely detailed information being added to annual reports, at a time when Government is supposed to be going for red tape bonfires. Those drafting the regulations clearly believe that top directors’ performance can be satisfactorily measured by short term metrics, but this is not so. As Professor Kay has stated, in the interests of their companies, directors should be taking the long view We believe that Government needs to look at the whole picture and give a strong push in the direction that the Kay Review, itself sponsored by Vince Cable, wants us to go.”
ENDS