Directors' remuneration: revised GC100 and Investor Group directors' remuneration reporting guidance

Amendments to incorporate issues addressed in the 2014 Statement: amendments to sections 1.1 (Structure of this guidance), 1.3 (Flexibility, discretion and judgement) in the section on "Discretion or judgement?", 2.2 (Annual statement), 3.6 (Statement of directors' shareholding and share interests), 3.10 (Statement of implementation of remuneration policy in the current financial year), and 4.3.4 (Short-term and long-term incentives) broadly to reflect and incorporate in the body of the 2016 guidance relevant issues addressed in the 2014 Statement.

Section 1.2. How to use this guidance: the addition of the phrase "should" used by the group in the 2016 guidance to recommend disclosures where, although not expressly required by the Regulations' wording, the group believes the matter reflects the Regulations' underlying intentions and is established as good practice.

Section 1.3. Flexibility, discretion and judgement: situations involving the remuneration committee's exercise of discretion in determining remuneration outcomes have been clarified including to provide that, where a director's performance against qualitative performance measures used is assessed as being very good but the company's overall financial performance over the relevant assessment period is not commensurate with that assessment, investors generally expect the remuneration committee to consider exercising discretion to moderate formulaic remuneration outcomes so that the remuneration outcome balances management performance and the shareholder experience.

Section 2.1. Introductory: the guidance on "Commercially sensitive performance measures of targets" has been expanded as regards any decision by the directors to rely on commercial sensitivity as a reason not to disclose in the remuneration report information on performance measures or targets, broadly to provide that such decision should be taken only where there are company-specific circumstances that lead the directors to positively form the opinion that the performance measure or target concerned is commercially sensitive. Further, before forming that opinion the directors should take account of the general investor expectations set out in the expanded guidance on the prospective and retrospective disclosure of performance targets and measures according to whether such measure or target relates to a short-term or long-term incentive.

Sections 3.4. Payments to past directors and 3.5. Payments for loss of office: a paragraph has been added in section 3.4 providing that where no payments to past directors have been made, companies may wish to consider making a "nil return" in the annual remuneration report, namely, a one sentence statement confirming no such payments have been made. The guidance cross-refers to section 3.5 such that, where applicable, the sentence could also refer to payments for loss of office.

Section 3.8. Percentage change in remuneration of director undertaking the role of CEO: where a company chooses a comparator group of employees when reporting on the percentage change between the relevant financial year and the preceding financial year in certain aspects of the remuneration of the CEO and that of the comparator group, a statement has been added that investors (and other stakeholders) generally expect a meaningful comparator group and not, for example, a narrow group consisting of senior managers.

Section 4.2. Introductory: a statement has been added that to the effect that if a company wishes to put forward a new policy to shareholders mid-cycle, investors generally expect a coherent rationale as to the reasons for doing so.

Section 4.3. Future policy table: the guidance has been clarified to reinforce that the maximum level of each component of remuneration should be disclosed for each executive director and to confirm the requirement to disclose the maximum salary that might be paid which must be explained in monetary terms or any other way appropriate to the company, such as a percentage of salary. Companies may wish to consider including a generic director policy if a new director role could potentially be created during the remuneration policy period.