The need for a CEO’s remuneration report depends on the general policy adopted by the board of directors as set out in the Companies Act 1986 that in nutshell states that: “the directors of a listed company must, for every year under this Act, prepare and submit to the Registrar of Companies a remuneration report…” On the other hand in England and Wales the Companies Act 1996 states: “the Board of Directors must, for every year under this Act, prepare and submit to the Registrar of Companies a financial report as to the assets, liabilities, profits and losses of the company…” In addition, in both jurisdictions a CEO’s remuneration report must be submitted to the Annual General Meeting of the company, which is also referred to as the Annual General Meeting ofholders.
The Companies Act also provides for two main procedures to be followed for the preparation of the remuneration report. Under the first procedure, the company can itself prepare the remuneration report, which it submits to the Registrar of Companies on behalf of itself. Under the second procedure, the Management Team of the Board of Directors will undertake the responsibility of preparing and submitting the report to the Registrar. The Companies Act also provides for certain additional procedures to be followed before the submission of the remuneration report, which are specified in clause 8 of Part II. These procedures are not addressed in this article but are available on the Companies Act websites.
At this point we would like to highlight some key aspects of the review and approval processes for remuneration of executives. The remuneration is usually set by the Board of Directors meeting for the first time at annual general meetings or at a special meeting of the Management Team of the Board of Directors. The process of reviewing and approving the remuneration is typically carried out by the Chief Executive Officers and senior staff of the Company who are responsible for reviewing and approving the remuneration of their colleagues.