Why have a remuneration committee

In this article we provide some pointers for the remuneration committee. However, because there are perceived conflicts of interest, membership of the remuneration committee by an executive director is minority practice see our article on CEO membership of the remuneration committee HERE. Updated : 12 Oct All rights reserved. Cookie Policy This website uses cookies. Please refer to our Privacy Policy for further information. IoD courses are designed to tackle the core competencies needed to thrive at board-level.

Download course brochure. Become a member. By using the iod. OK, I agree. Home News News Articles. Factsheets What is the role of the remuneration committee? Remuneration committee members do not need expert knowledge, but they do need data to make sound decisions on levels of remuneration, on the link between remuneration and performance, and on the structure and cost of all elements of the executive package Remuneration committees need to have a thorough understanding of their company and the forces that shape directors' remuneration.

Business size Size can affect all aspects of pay — base salary levels, annual bonus design, performance measures and the type of long-term incentive plans that are appropriate.

Performance record and prospects Is the company a new business, an established business with a steadily improving performance, a business that is going through a recovery or a turnaround? Sector Both business sector and the position of a business within it are significant. Internationalisation, complexity and innovation Should the companies all follow UK pay norms?

Cashflow and debt levels Both of these might place an important limitation on smaller organisations where the pay of directors can be a significant proportion of business costs.

Key performance measures These should provide the essential underpinning when it comes to designing incentives, be they short or long term.

Understanding company culture and values Every organisation has its own culture and values and these are frequently reflected in remuneration, whether in the design of incentives, the type of benefits available or, indeed, the level of remuneration itself. Understanding current arrangements Remuneration committees are rarely given the luxury of starting from a clean slate.

In particular, the committee must know: The overall remuneration philosophy — the positioning of total remuneration relative to the market place, the definition of the market place, the approach to short-term and long-term incentives, the benefits policy, etc. Alternatively, send us an email using the feedback icon in the toolbar below.

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