10 things a Remuneration Committee should know

26th June 2025

Julia Hanna

Best practice in governance and fair pay are crucial when it comes to ensuring executive pay aligns with company performance, shareholder expectations, and regulatory requirements.

Whether or not you’re a listed company bound by specific regulations, or privately owned, the Remuneration Committee (RemCo.) play a crucial role in ensuring this is the case.

As part of our series of ‘Top 10’ blogs celebrating our tenth anniversary, I’m sharing my thoughts on the ten things that every RemCo. should know:

1. Align reward with business strategy and culture

Ensure there is a clear reward strategy that aligns with your purpose and values so that you are rewarding the right behaviours and building an engaged workforce.

Executive pay, in particular should support long-term growth and company values, avoiding excessive risk-taking through poorly structured incentives.

2. Adopt strong governance and follow good practice

Even if they are not mandated, I always recommend the principles from the UK Corporate Governance Code are considered as a benchmark. It sets principles for executive pay, fairness, and transparency and ensures remuneration aligns with the long-term.

The Directors’ Remuneration Reporting Regulations, require a Directors’ Remuneration Policy (approved by shareholders at least every three years) and an annual Directors’ Remuneration Report.

3. Comply with regulations

Keep up with changes in regulationsfrom Financial Reporting Council, Financial Conduct Authority and the Department for Business, Energy & Industrial Strategy.

And, of course, comply with:

Employment law (e.g. contractual fairness, equal pay).
Tax regulations (e.g. HMRC rules on incentives, bonuses).
Data protection (GDPR) in pay reporting.

4. Consider shareholder and investor expectations

Listed companies are likely to have major institutional investors (e.g. BlackRock, LGIM), all of which have guidelines on executive pay. Proxy advisors (e.g. ISS, Glass Lewis) also influence shareholder voting.

These shareholders have a ‘say-on-pay’ and shareholder votes:

Binding vote on the Remuneration Policy (every three years).
Advisory vote on the Remuneration Report (annually).
Significant dissent (>20% against) requires a company response.

As well as institutional investors, private companies may be funded by private equity or be family owned. All these influences will have their own pay expectations.

So, understand expectations and engage proactively to avoid conflicts over executive remuneration.

5. Ensure market data isn’t seen as the answer

Too often, I see a heavy reliance on the ‘market median’. But data only gives you an indication of what’s typically paid to other people in the external market, in broadly similar, but different, roles.

Interpret the data alongside knowledge of personal and business performance, internal equity, size of role, maturity of the organisation etc. to determine the fair and proportionate level of pay.

6. Consider fair pay across the organisation

Many RemCo’s focus is on remuneration of the executive team. Broadening the remit to include all people and culture matters ensures fair and proportionate decisions.

The CIPD’s “Role of the RemCo” recommends reviewing workforce pay and meaningful workforce engagement.

7. Take a broad view of performance

Bonuses, long term incentive plans (LTIPs), and incentives should align with measurable business success. Ideally include environmental, social and governance (ESG) and non-financial metrics (e.g. customer satisfaction, employee retention), alongside financial targets.

Long-term incentives (LTIPs) should be understandable (sadly, this is often not the case) and support sustainable growth. Policies should allow for the recovery of bonuses or LTIPs in cases of misconduct, misstatement, or poor performance.

8. Pay transparency is beneficial

A clear reward strategy and pay principles set out how pay is managed. Go further and align with the EU pay transparency directive by creating clear pay structures that can be shared with employees, both current and prospective.

This level of transparency is good practice that will build trust with employees and help ensure pay is equitable.

9. Investigate pay gaps and have an equality action plan in place

Alongside pay transparency, pay equity is increasingly coming into focus. Depending upon eligibility, both CEO pay ratios and gender pay gap reporting may be required. But even if not mandated, these should be monitored.

Deep dive into your pay gap analysis to understand what’s driving the gaps. Currently voluntary, the Employment Rights Bill will require employers to publish an equality action plan.

Many forward-thinking organisations are voluntarily reporting beyond gender. While the draft Equality (Race and Disability) Bill plans to extend pay gap reporting to include ethnicity and disability gaps, others are already going further calculating religious and socio-economic background gaps too.

10. Manage reputational risk

Executive pay is highly scrutinised by the media, the public, employees, unions and regulators. If not handled carefully, it can damage employer brand and employee relations.

So ensuring pay is well thought through, justified, and rewards performance – not failure – is key.

How we can help

At Verditer, we are specialists in creating a transparent approach to pay and reward. Do get in touch if you’d like our help with executive remuneration, including executive pay benchmarking, incentive design and coaching for RemCo members.

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