As you know, the new UK Corporate Governance Code (the 'Code') took effect for accounting periods beginning on or after 1 January 2019. Many companies with a premium listing on the London Stock Exchange will now be in an accounting period to which the new Code applies and will need to ensure they can operate their executive incentive arrangements in compliance with the following provisions:
- Share awards to be released on a phased basis and subject to a total vesting and holding period of five years or more - can you achieve this within your existing plan rules/remuneration policy?
- Avoiding formulaic outcomes – do your plan rules/remuneration policies have sufficient flexibility to scale down or claw back share incentive awards for executives if, for example, the performance condition would result in a pay-out that is excessive relative to the company's current economic position?
- Post-employment shareholding requirements – does your existing shareholding policy extend to the period after employment? How will executives be contractually bound by such a policy (should signing up to the policy be made a condition to the exercise of share awards?)
- Aligning the levels of pension contributions/payments in lieu for executive directors with that of the general workforce – is it possible to alter existing commitments? What steps are being taken to bring the levels of pension contribution closer together?
We would be happy to review your arrangements and discuss how they can be adapted or operated in a way that complies with the new Code. Please do not hesitate to contact a member of the Travers Smith Incentives and Remuneration Group.