■ Shareholders in publicly listed UK firms will get a binding vote on directors’ pay policy every three years.
■ They will vote on the whole package, covering salaries, bonuses and exactly what determines the level of pay.
■ That includes severance packages, in an effort to end “rewards for failure” when unsuccessful bosses leave the firm.
■ The exact level of any director’s severance package will be published swiftly, probably within 30 days.
■ If the policy changes it will automatically trigger a new binding vote.
■ Each year directors’ pay will be published as a single figure, including details of performance against metrics for long-term incentives, pension entitlements and shareholdings.
■ An advisory vote on these awards will still be held every year, as it is now. If a majority votes against, it will trigger a binding vote the next year.
■ If a “significant minority” votes against, firms may have to publish a statement explaining – the Financial Reporting Council (FRC) will consult on this.
■ The FRC will also determine the point at which a vote against becomes “significant.” Vince Cable suggested 25 per cent as a possible starting point.
■ The policy will be enforced – awards outside the pre-agreed levels could see directors personally liable under company law for making unauthorised payments.
■ It is not yet known what will happen to directors already on long-term contracts, though the government does not intend the new rules to lead to any retrospective changes to any individual’s pay.