Dec 16, 2010


Add a note hereReward management in the UK boardroom is complicated by the way that UK companies are run and has to be set against the backdrop of the many reviews of directors' pay and related corporate governance issues that have taken place here in the past decade or so.

Add a note hereCorporate Governance

Add a note hereIn simple terms, a UK company is owned by its shareholders, but the power and responsibility for almost all decisions concerning its business operations are devolved to its board of directors, including most decisions about pay. Public company shareholders in particular are usually far removed from any day-to-day or even strategic decision making. In the UK (as in the USA) the board of directors is a single or 'unitary' structure, responsible for corporate governance as well as business decision making. While some other countries use two-tier board structures that separate the two, the 'unitary' board structure relies on an internal division of responsibility, typically between non-executive (corporate governance) and executive (business decision making) directors.

Add a note hereUK Reviews of Corporate Governance and Directors' Pay

Add a note hereA number of reviews have taken place in the UK into corporate governance processes and directors' pay. They were each undertaken in response to a different set of factors but all included recognition (implicit or explicit) of the potential for conflicts of interest arising as a result of the 'unitary' board structure. The sequence started with the Cadbury Report, was furthered by Greenbury and tied together by Hampel. Subsequently, Turnbull and then Higgs examined how boards work together, including a review of the structures and processes by which directors' rewards are set. The stated objectives of these reviews were various but at their hearts was often the concern of the government of the day that directors' pay might, at best, be out of control and, at worst, include aspects that might be encouraging behaviour contrary to shareholders' interests. 


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