On 7 September 2026, the government announced a consultation on reforms to the UK’s corporate reporting framework. The government’s stated aim is to support economic growth - and the UK’s international competitiveness - by ensuring that the UK’s corporate reporting framework ‘is the most proportionate and effective in the world’. The consultation will run until 30 November 2026.
The proposals under consultation are wide-ranging and cover all aspects of corporate reporting. This blog focuses on the proposals that relate specifically to remuneration.
The government makes clear in the consultation paper that it continues to support remuneration reporting requirements. However, it notes that both companies and shareholders have commented that existing rules ‘are not fulfilling their purpose as directors’ remuneration reports are too long and too complex.’ As a result, the consultation seeks views on a range of possible changes.
In places, the consultation paper is light on detail and contains only limited analysis. However, the remuneration proposals are significant and likely to generate considerable debate on where the balance should be struck between the need to ensure adequate provision of information to shareholders on the one hand and the desire to alleviate disproportionate reporting burdens for companies on the other. The government’s view is that the reporting burden is too great, with the complexity of remuneration reporting requirements also inhibiting transparency rather than promoting it.
‘Comply or explain’ and the UK Corporate Governance Code
The government acknowledges concern that the comply or explain regime underpinning the UK Corporate Governance Code (the Code), which requires companies subject to the Code either to comply with Code provisions or explain why they have not done so, does not provide the flexibility for companies that was intended when the Code was introduced. Although this is not spelt out in the consultation paper, the basis for the concern is that some investor bodies tend to treat provisions as requirements, regardless of the strength of any explanation provided.
Unhelpfully, the consultation paper makes no explicit proposals on how to re-introduce greater flexibility into the comply or explain model and simply indicates that the government is ‘interested in ideas and suggestions as to what more can be done to make better use of the Code’s flexibility’. This leaves the unfortunate impression that the government is aware that companies see this as an issue but is not sure what to do about it.
It is worth noting in this context that one of the principal ways in which investors currently signal concerns about the acceptability of an explanation for a departure from a Code provision on remuneration is via the annual advisory vote on the implementation of the directors’ remuneration policy. This avenue will no longer be open to shareholders if, as described in more detail below, the requirement for the advisory vote is removed. This may lead investors to focus on different pressure points (such as the next mandatory shareholder vote on the remuneration policy or the annual re-election of directors).
What elements of remuneration reporting will be retained?
The government proposes that the following remuneration reporting obligations should be retained:
- the so-called single figure table (but see further below for discussion on how the components of the single figure are calculated);
- the statement by the remuneration committee chair, summarising the key decisions or proposals on directors’ pay, including any use of discretion;
- the requirement to disclose performance conditions attached to pay awards in the previous year;
- the forward-looking directors’ remuneration policy setting out maximum variable pay outcomes for executive directors based on performance criteria and how these link to company strategy; and
- the performance graph showing CEO pay mapped against Total Shareholder Return in the past ten years.
What elements of remuneration reporting will be simplified and/or ‘refined’?
The consultation paper confirms that the government ‘proposes to refine the existing methodologies for calculating the total single figure of remuneration’. The government acknowledges that the provision of information is essential for investors to scrutinise and vote on pay matters and is ‘seeking views on how the methodologies might be refined to provide greater clarity on what should be included in calculations’. It is not clear what this means and no concrete proposals are made. The only example given is the provision of a de minimis threshold, with no indication of how this might apply. One is left with the sense that the government is unsure what changes to propose and is waiting for responses to the consultation. As a result, although companies may be encouraged by the prospect of a simpler calculation methodology, the lack of detail makes it impossible at this stage to assess what is likely to change.
The government also proposes to refine the current requirement for the directors’ remuneration report to include information on how the remuneration policy will be implemented for the following year. The government has indicated that it is minded either to remove the requirement altogether or to require such information only when there is a material update (in which case an ‘outline’ of how the policy is being implemented would be required – although no guidance is given on what an outline means in this context). The consultation paper cites the arrival or departure of an executive director as an example of a material update: in practice, the company may not know about future board changes at the point when the information would need to be provided.
The government is also seeking views on whether requirements to disclose directors’ shareholdings, including share options, should be retained. The government notes that the information is available through other sources. Investors are likely to take the view that it is helpful for this information to be readily accessible in a single place (even though it may be out of date by the time the information is published).
What elements of remuneration reporting will be removed?
The most significant remuneration-related change proposed by the consultation paper is the removal of the requirement for quoted companies to hold an annual advisory shareholder vote on the implementation of their directors’ remuneration policy in the preceding financial year. At present, the annual advisory vote sits alongside (and in fact predates) the requirement for quoted companies to obtain mandatory shareholder approval for the terms of their directors’ remuneration policy at least once every three years.
The government’s rationale for its proposal to remove the annual advisory vote is that it is not ‘useful’, as it is a non-binding vote in relation to a policy that has already been approved by shareholders, and which ‘takes up valuable shareholder and company time and resource that could be better directed onto other matters at the AGM.’
This proposal is likely to be controversial. Even though the annual vote is not binding (in the sense that the company is not legally obliged to take action in response to a negative shareholder vote), it may still be useful from an investor perspective and a significant ‘vote against’ will normally impose significant pressure on the remuneration committee to re-evaluate its approach and potentially change course.
Many investors value being given a formal opportunity to vote on how the directors’ remuneration policy has been operated in practice and will see the government’s proposal as a significant dilution of their ability to seek to hold companies to account for perceived shortcomings in implementation.
Although companies are likely to welcome the lifting of the burden imposed by an annual shareholder vote they should also be mindful of other less attractive implications. For example, most companies attempt to build a degree of flexibility into their policies, so they can address specific and unpredictable situations as they arise. However, if shareholders lose the opportunity to monitor and vote on how those flexibilities have been applied in practice, they may look to impose more restrictive terms the next time the remuneration policy is put to a mandatory shareholder vote. This could operate as a significant operational constraint for companies, and in a worst-case scenario may result in a need for the company to obtain specific shareholder approval before it can implement a remuneration arrangement that falls outside the terms of a much more narrowly drawn remuneration policy.
The government is also proposing the removal of other remuneration reporting requirements, either on the basis that the information is not financially material or decision-useful for investors or creditors or for reasons of duplication, because related provisions are included in the Code and therefore already need to be addressed under comply or explain principles. Unhelpfully, there is no attempt to list what will be removed but, by implication, it includes all remuneration reporting that is not described above under the headings of requirements that will be retained and requirements that will be simplified/refined. It remains to be seen precisely what requirements the government considers to constitute remuneration reporting and whether it really is the intention for everything else to be swept away.
Various remuneration-related disclosure requirements are also slated for removal, including:
- the relative importance of spend on pay;
- executive director pay prior to the company’s listing;
- the hypothetical illustration of LTIP outcomes assuming a 50% share price appreciation during the plan performance period;
- information on the work of the remuneration committee, including details of external advisers;
- malus and clawback policy and any application use of malus and clawback in the prior year;
- how the remuneration committee has engaged with shareholders and employees on pay proposals;
- how directors’ remuneration aligns with wider employee pay policies; and
- how the company is addressing any significant shareholder dissent on a vote on remuneration.
Given all but the first three of these requirements are already wholly or substantially covered by provisions of the Code, their removal is unlikely to make a material difference to a quoted company’s disclosure obligations, but the proposal seems sensible.
In terms of duplication more widely, one point that the consultation does not address is how any simplification of remuneration reporting and disclosure requirements would dovetail with comparable or similar requirements in the UK Listing Rules (including in particular UKLR 6.6, which includes various remuneration-related items of information that need to be included in the annual report and accounts). It would be helpful if this point can also be addressed as part of the overall evaluation of the remuneration reporting landscape.
Conclusion
Although the government’s proposals on remuneration matters lack detail in various respects, the overall aim – to streamline and simplify the current reporting and disclosure regime - is clear and to be welcomed.
Some of the suggestions contained in the consultation paper, especially the proposed removal of the requirement for the annual advisory vote on the implementation of a quoted company’s remuneration policy, are likely to be controversial and can be expected to generate strong reactions. Given that the consultation paper suggests a degree of governmental diffidence in some areas (for example, on reinforcing the principles of flexibility underpinning comply or explain), it is to be hoped that strong reactions from consultees do not lead to a fudged outcome. The government’s stated ambition is that a ‘once in a generation review of corporate reporting [can] deliver the most proportionate framework in the world’. It is up to the government to ensure that it remains bold and delivers the simplified, less complex but balanced remuneration reporting regime it has promised.
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