FRC expected to back paying NEDs in shares to help UK companies attract top global talent – White & Case comment
The Financial Reporting Council (FRC) is expected this week to update the UK Corporate Governance Code guidance, making it clear that the payment of non-executive directors in shares is appropriate, enhancing the ability of UK listed companies to attract the highest calibre of talent from across the global stage.
Commenting, Tom Matthews, partner and head of White & Case’s EMEA Activism practice, said: “If introduced, this will be a win-win for shareholders and issuers and bring the UK more in line with the US and private markets. Broader levels of share ownership by NEDs, including through share-based remuneration, should improve the quality of NEDs in the UK market and better align them with shareholders generally. Better remuneration should reduce the risk of overboarding, allowing NEDs to focus on fewer roles, ultimately strengthening their oversight of management teams. This change will allow listed companies to attract and retain the best talent on their boards without committing to pay more cash than they would be comfortable with.
“This potential change, along with other recent listing reforms from the FCA and LSE, will enhance the UK’s competitiveness as a listing venue. Stronger boards should also make issuers less vulnerable to activist pressure, which is particularly important in an environment marked by heightened activist aggression where we have seen increased calls for the removal of multiple Board members and, in some cases, calls for full Board sweeps.”