Roles of Remuneration Committee

Firstly, the committee is charged with determining remunerations policy on behalf of the board and the shareholders. In this regard, they are acting on behalf of shareholders but for the benefit of both shareholders and the other members of the board. Policies will typically concern the pay scales applied to directors’ packages, the proportions of different types of reward within the overall package and the periods in which performance related elements become payable.


Secondly the committee ensures that each director is fairly but responsibly rewarded for their individual contribution in terms of levels or pay and the components of each director’s package. It is likely that discussions of this type will take place for each individual director and will take into account issues including market conditions, retention needs, long-term strategy and market rates for a given job.


Third, the remunerations committee reports to the shareholders on the outcomes of their decisions, usually in the corporate governance section of the annual report (usually called Report of the Remunerations Committee). This report, which is auditor reviewed, contains a breakdown of each director’s remuneration and a commentary on policies applied to executive and nonexecutive remuneration.


Finally, where appropriate and required by statute or voluntary code, the committee is required to be seen to be compliant with relevant laws or codes of best practice. This will mean that the remunerations committee will usually be made up of nonexecutive members of the board and will meet at regular intervals.



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