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News March 2013 Financial Reporting Lab report on 'Reporting of pay and performance'

Financial Reporting Lab report on 'Reporting of pay and performance'

05 March 2013

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The Financial Reporting Council (FRC) has today issued a Financial Reporting Lab (Lab) project report on ‘Reporting of pay and performance’ (PDF).

At the request of the Department of Business Innovation and Skills (BIS), the Lab has undertaken a second project on remuneration - this time exploring the views of investors and companies on two new aspects of the draft reporting regulations on remuneration:

  • scenario charts demonstrating how directors’ pay varies with performance, and
  • a chart comparing CEO pay based on the single figure for remuneration, with company performance, measured using Total Shareholder Return (TSR).

Views were also sought on certain aspects of the Lab’s first report 'A single figure for remuneration' (PDF)
 
Director of the Financial Reporting Lab, Sue Harding, said:

“This second project has again achieved significant agreement among participating members of the investor and corporate communities. Participants favour a simplified version of the scenario charts proposed by BIS. They also conclude that, rather than replacing the current five year TSR chart, this should be retained and be supplemented with a simple table setting out historic levels of CEO pay together with information on the level of performance-related elements of pay. We hope that BIS finds the conclusions in this report helpful in their decisions on remuneration reporting requirements”.

The Lab encourages readers of its reports to comment on their content and presentation.  Any feedback will be taken into account in how the Lab approaches and reports on future projects. Please send any feedback to financialreportinglab@frc.org.uk.


Notes to editors:

  1. The FRC is responsible for promoting high quality corporate governance and reporting to foster investment.  We set the UK Corporate Governance and Stewardship Codes as well as UK standards for accounting, auditing and actuarial work.  We represent UK interests in international standard-setting.  We also monitor and take action to promote the quality of corporate reporting and auditing.  We operate independent disciplinary arrangements for accountants and actuaries; and oversee the regulatory activities of the accountancy and actuarial professional bodies.

  2. The Financial Reporting Lab provides a unique environment where investors and companies can come together to develop pragmatic solutions to today’s reporting needs:

    1. As a learning space, companies can use the Lab to test new and advanced reporting formats with investors, and investors can indicate areas where management can add greater value through the information they provide;

    2. As a hub to support innovation in reporting, the Lab’s focus on gathering and sharing evidence from the market provides the broader corporate community with feedback from investors on the value that new reporting formats bring. More information about the Lab’s work can be found here: Financial Reporting Lab.

  3. The report “Reporting of pay and performance” can be found here: Published project reports.

  4. The Lab’s previous reports on remuneration reporting, debt and cash flow disclosure and market risk disclosures can be found here:  Published project reports.

  5. The Lab has recently begun a project on audit committee reporting and welcomes further participants.  Details can be found here: Updates.

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Alana SinnenCommunications Manager