In our comprehensive new guide to remuneration committee best practice, we analyse market expectations of committee members and look at best practices from various territories
Remuneration committee play an important role in ensuring an objective approach to the management of executive pay. There is growing recognition that companies listed on world equity markets should have a body of independent individuals who are responsible for setting executive directors’ remuneration.
Management is responsible for the day-to-day running of the business with the aim of maximising value for shareholders, while taking into consideration the interest of other stakeholders. One of the board’s main roles is to critically review the strategy and the decisions taken by the management and to ensure that effective controls are in place to safeguard the investment made by shareholders. These functions are particularly important where there is potential for unfair influence or conflicts of interest, as in the setting of executive remuneration.
The remuneration committee, as a committee of the main or supervisory board, acts under delegated authority to provide an independent influence of executive pay. The delegation of responsibility to a committee of the board, constituted entirely of independent non-executive directors, provides a significant degree of security for shareholders. It also increase the efficiency of the board, by removing certain processes from its remit and ensures that the work of the committee is free from conflict.
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