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Remuneration committee - Coggle Diagram
Remuneration committee
A formal and transparent procedure for developing policy on executive remuneration and determining director and senior management remuneration should be established. No director should be involved in deciding their own remuneration outcome
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Remuneration consultants
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The Code now provides that where remuneration consultants are appointed this should be the responsibility of the remuneration committee
The remuneration consultants should be identified in the annual report alongside a statement about any other connection that they have with the company or individual directors
Remuneration committee members should exercise independent judgement when evaluating the advice of external third parties and when receiving views from executive directors and senior management
These recommendations principally reflect concerns over the objectivity of remuneration consultants and the role that they may have played in promoting spiralling executive remuneration
Remuneration consultants may have conflicts of interest by virtue of the fact that they are also engaged by the executives to advise the company on other aspects of remuneration or may have another connection with an individual director
In these circumstances there is a risk that they will make recommendations which favour the executive directors and are not necessarily in the best interests of the company
Remuneration consultants may be inclined to recommend complex remuneration schemes in order to increase their fees and make it more difficult for the remuneration committee to dispense with their services in future years
Remuneration consultants may put pressure on the remuneration committee to accept their advice (eg by failing to come up with any credible alternative)
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