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Are binding "say on pay" votes coming to the U.K.?

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Jarrett Dieterle
Legal Intern, Manhattan Institute's Center for Legal Policy

Manhattan Institute's Proxy Monitor project tracks, among other things, shareholder votes on executive compensation packages. These so-called "say on pay" votes are now mandated under Dodd-Frank. Even before Dodd-Frank however, say on pay votes became more popular in the U.S., borrowed in large part from the established British practice.

Like in the U.S., say on pay votes are merely advisory in Britain - but moving forward this could change. The Wall Street Journal reported last week that some 60% of shareholders of the British advertising agency WPP voted against the company's 2011 executive compensation package. As the article goes on to note, "[The] U.K. government is consulting on plans to give investors more control over pay."

These plans appear to stem from a Department for Business Innovation and Skills (BIS) "consultation document," which recommends making say on pay votes in Britain binding. The BIS report advances the following proposal:

The Government proposes to address the shortcomings of the current advisory vote by giving shareholders a binding vote on a company's remuneration policy. Companies will have to set out, at the start of the year, a proposed pay policy for the year ahead, including potential payouts and the performance measures that will be used. This will be put to an annual shareholder vote. Any proposed changes to remuneration policy for the forthcoming year will be contingent on the resolution being carried and companies will be required to act within the scope of the remuneration policy agreed by shareholders at the start of the year.

While it is unclear whether Britain will ultimately adopt binding shareholder votes, Prime Minister David Cameron has indicated support for the idea in the past.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


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The Manhattan Insitute's Center for Legal Policy.