Remuneration

The remuneration committee is separate from the nomination committee – is separate from the audit committee – is separate from the risk committee (if there is a separate risk committee) – these are all committees that assist the board of directors in the discharge of their duties.

The remuneration committee should have delegated responsibility for determining the policy for executive director remuneration and setting remuneration for the chair, executive directors and senior management.

The remuneration of NEDs should be determined in accordance with the company’s Articles of Association (if relevant) or the board. Levels of remuneration for the chair and all NEDs should reflect the time commitment and responsibilities of the role and should NOT include share options or other performance-related elements.

For all directors: “No director should be involved in deciding their own remuneration outcome.”

Remuneration policies are disclosed in the annual report. If the shareholders don’t like how the directors are managing the company on their behalf they can remove them by ordinary resolution in a general meeting – or sell their shares!

There will be a remuneration policy which for NEDs will specify terms – how much time they are required to commit, etc. If the remuneration of the NED with recent financial experience on the audit committee (call him Frank) is being discussed – he’s not on the remuneration committee. If he happened to be in the board meeting at which the board decides on NEDs remuneration, Frank doesn’t vote on the resolution.

You really don’t have to worry about such minutae – it is the principles of corporate governance that you need to know in so far as they are relevant to audit – you might get a couple of OTs in Section A in this syllabus area.