IoD head: put employees onto Remcos as observers
Published on 18th May 2015
Listed companies should consider allowing an employee to observe Remuneration Committee meetings, as a way of increasing transparency around the setting of executive pay. That is the argument put forward by Simon Walker, Director General of the Institute of Directors, in a speech to the High Pay Centre on 13 May 2015.
As reported by The Times, Mr Walker said that:
“Bringing an employee on to the board and the remuneration committee as an observer, on a voluntary basis, could be a good step. It would make the process more transparent and it would make executives consider how their pay requests are going to go down with employees and with the public.”
The suggestion that employees should attend Remco meetings in some role is not a new one. The Labour Party, in its manifesto for the 2015 General Election, said that it would “require” employee representation on Remcos. The advantage of Mr Walker’s suggestion is that attending with “observer” status would not – provided that procedures that are commonly used in other areas of corporate life, such as private equity, were followed – lead to possible problems with the employee unintentionally acquiring director status, or liability for the actions of directors. Whether the Board as a whole, and the directors who constitute the Remco, would be at ease with an employee observer is a broader question.
