New guide on directors' pay and benefits issues warning on share options and bonus schemes
16 February 2005
LG collaborates with Ernst & Young, Institute of Directors and Lane Clark & Peacock on practical guide to executive remuneration.
LG is pleased to announce the launch of a new practical guide for non-executive directors on remunerative committees to assist with the setting of directors' pay and rewards.
"Directors' Remuneration: A practical guide to setting the pay and benefits of senior executives" (the "Guide") reviews a comprehensive range of issues for consideration, including: the corporate governance framework; factors in determining base salary; and how to effectively design bonus plans, incentive plans and pension schemes.
Caroline Pugh, employment solicitor at Lawrence Graham who outlines in the Guide the critical aspects of the executive employment contract, warns against the potential pitfalls of discretionary bonus schemes and share option promises. She says:
"Recent case law has made clear that reserving discretion to an employer in determining variable pay elements does not allow employers to simply do as they please and must be done "reasonably". The more certainty a contract can provide as how discretionary awards will be made, without preventing flexibility to be exercised, the easier it will be for decision makers to be sure they do not fall into the potential "unreasonable" trap."
Commenting on the Guide's timely release, Caroline adds:
"This Guide comes at a time when the activities of Remuneration Committees are under ever closer scrutiny and is a ready tool for the development of best practice within organisations."
Other contributors to the Guide include business author and journalist Carol Kennedy, on the future of executive pay, and Ernst & Young company secretarial partner, Jarod Simpson, on the main disclosure rules.
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Caroline Pugh
+44(0)20 7759 6433