Legal Intern, Manhattan Institute's Center for Legal Policy
Earlier this week, we discussed the possibility of binding "say on pay" votes being enacted in the U.K. In particular, we highlighted a BIS report that proposed several policies which would empower shareholders with regard to executive compensation. Although binding "say on pay" votes had been discussed, no official legislation was being considered by the British Parliament.
That is, until now. On Wednesday, U.K. Business Secretary Vince Cable introduced a plan to Parliament that would give shareholders binding votes on executive compensation, as well as requiring companies to annually publish a "simple figure" disclosing how much top executives were paid in the past year.
Shareholders would have an annual binding vote on executive-director pay unless a company leaves its policy unchanged, in which case the vote will take place every three years. Investors also will vote on exit payments.
The plan still has to go through Parliament, although it is widely expected to pass. The push for binding say on pay votes gained renewed traction in Britain this spring after several high-profile disputes between shareholders and executives at large companies.
Executive pay has become a major issue in recent months in the U.K., with shareholders increasingly unwilling to allow bosses to receive high salaries when their companies underperform. The debate also has reverberated in the U.S., where some companies have failed to get majority support for their executive-pay plans this year.
In 2010, Dodd-Frank mandated say on pay votes in the U.S., but they remain advisory rather than binding - at least for now.