E.1 The level and make-up of remuneration and disclosure
An issuer should have a formal and transparent policy on directors’ remuneration and other remuneration related matters. The procedure for setting policy on executive directors’ remuneration and all directors’ remuneration packages should be formal and transparent. Remuneration levels should be sufficient to attract and retain directors to run the company successfully without paying more than necessary. No director should be involved in deciding that director’s own remuneration.
The remuneration committee should consult the chairman and/or chief executive about their remuneration proposals for other executive directors. The remuneration committee should have access to independent professional advice if necessary.
The remuneration committee's terms of reference should include, as a minimum:—
(a) to make recommendations to the board on the issuer's policy and structure for all directors' and senior management remuneration and on the establishment of a formal and transparent procedure for developing remuneration policy;
(b) to review and approve the management's remuneration proposals with reference to the board's corporate goals and objectives;
(i) to determine, with delegated responsibility, the remuneration packages of individual executive directors and senior management; or
(ii) to make recommendations to the board on the remuneration packages of individual executive directors and senior management.
This should include benefits in kind, pension rights and compensation payments, including any compensation payable for loss or termination of their office or appointment;
(d) to make recommendations to the board on the remuneration of non-executive directors;
(e) to consider salaries paid by comparable companies, time commitment and responsibilities and employment conditions elsewhere in the group;
(f) to review and approve compensation payable to executive directors and senior management for any loss or termination of office or appointment to ensure that it is consistent with contractual terms and is otherwise fair and not excessive;
(g) to review and approve compensation arrangements relating to dismissal or removal of directors for misconduct to ensure that they are consistent with contractual terms and are otherwise reasonable and appropriate; and
(h) to ensure that no director or any of their associates is involved in deciding that director’s own remuneration.
The remuneration committee should make available its terms of reference, explaining its role and the authority delegated to it by the board by including them on the Exchange's website and the issuer's website.
The remuneration committee should be provided with sufficient resources to perform its duties.
Issuers should disclose the directors’ remuneration policy, details of any remuneration payable to members of senior management by band and other remuneration related matters in their annual reports.
Recommended Best Practices
If E.1.2(c)(ii) is adopted, where the board resolves to approve any remuneration or compensation arrangements with which the remuneration committee disagrees, the board should disclose the reasons for its resolution in its next Corporate Governance Report.
A significant proportion of executive directors' remuneration should link rewards to corporate and individual performance.
Issuers should disclose details of any remuneration payable to members of senior management, on an individual and named basis, in their annual reports.
Issuers generally should not grant equity-based remuneration (e.g. share options or grants) with performance-related elements to independent non-executive directors as this may lead to bias in their decision-making and compromise their objectivity and independence.