Exploring Corporate Governance Around the World

By Allison Garrett, Senior Vice President for Academic Affairs at Oklahoma Christian University

Wednesday, February 08, 2006

Executive Pay in the UK

Today's Wall Street Journal contains an article titled "No Excessive Pay, We're British." The article notes that in the UK shareholders are entitled to vote on executive compensation and routinely disapprove of compensation packages. These votes, which technically do not bind the board of directors, are nevertheless followed by the boards in a majority of cases. After all, the next vote might be to elect new directors.

The article also notes that executive pay is significantly higher in the US, and less likely to be tied to performance than pay for executives in the UK. The gap between the two countries has been widening in recent years.

According to the article, UK disclosure rules require more disclosure in 3 areas than the US rules:
  • pension plans;
  • option grants; and
  • whether compensation consultants were employed by the company.

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