A FTSE250 Company Secretary writes...
It has been suggested that it is becoming the norm for listed companies to invite their Finance Directors to attend Remuneration Committee meetings (presumably as well as the CEO or the HR Director). However, NED contacts and fellow CoSecs with whom I have spoken are surprised, as their companies are not doing this. Are other companies including their FD in Remuneration Committee meetings, and if so, what are the reasons for doing this?
I’m likewise surprised that there’s a suggestion that the FD attending the rem com meetings is becoming the norm. Our FD does not attend the rem com meetings. The CEO attends occasionally at the invitation of the rem com, but there is always part of those meetings that has no-one present other than the NED members of the rem co.
If the input of the FD is required to rem com matters this is done by way of the FD working on papers or other information that is provided to the FD.
Of course, being a plc board director the FD with that “hat” on is part of the board that receives a report of the decisions of the rem com after it has met.
CFO is invited only when his/her views on peformance conditions, pension deficit, etc. impact on remuneration matters. Also included when views on remuneration matters pertaining to the executive committee and any levels below (wider remuneration strategy) requires input from executive directors (CEO and CFO). The Remco Chairman does ask the CEO, CFO and General Counsel & Company Secretary to step out where there is a conflict, or if the Remco wants to have a private discussion. Group HR Director and Group Rewards Director also attend all Remco meetings, together with remuneration consultants. They also step out when necessary.
We have five NEDS and two EDs. Everyone attends both AC and RC. Noms Com is more select. The Remco Chair has no qualms about kicking out the CEO and FD if they want to have a private discussion or if the discussion is about an individual’s performance or package. HRD also attends all Remco meetings.
Reason for FD attendance is to help Remco understand financial parameters and performance of bonus and option plans. We use sales, profit, EPS, ROCE, plus 3x specific bonus measures which can be financial or non-financial.
It is much more efficient to have the FD in the room, otherwise he needs to brief the CEO or HRD – why not hear it from the horse’s mouth – so long as the Chair is comfortable going into closed session?
No, our Finance Director does not attend. The CEO and HR director attend by invitation.
No we do not invite our Finance Director or the HR Director. Only the CEO attends by invitation.
Ours does not. He is consulted as necessary before meetings if input required. However, the CEO is fully briefed and covers off any questions in the meeting.
Although not a listed company we seek to comply as if we are and until recently didn’t invite the FD. However, our FD is now responsible for the HR function and therefore attends all Remuneration Committee meetings.
Where the input is helpful and required for LTIP financial targets they attend but it is a case of reviewing the agenda each time and trying to avoid an assumption that they need to be there.
The FD does not attend RemCom meetings as our CEO (as a former FD) is comfortable handling any financial matters. If this were not the case, he would be invited by invitation only.
we only invite our FD to RemCo meetings where his input is needed, as posted below, for settlement of, or understanding the impact of setting, performance conditions in bonus or LTIPs and then only for that part of the meeting and when explanation or clarification is needed. The CEO is invited more often. This has been the case when we were FTSE250 and FTSE SmallCap and over the “life” of 2 FDs.
At the request of the Remco, our CFO will only attend to support discussions on financial performance conditions both when setting and determining the extent to which they have been satisfied. The CFO will rarely, if at all, participate in any other Remco discussions and if he does it will, of course, be at the request of the Remco Chair.
We invite our CFO on as required basis where his input is valuable to the Committee. Examples of this would be on finance related bonus or LTIP targets.
At one time our FD did attend but increasingly it was felt there was a conflict of interest. Now he would only be invited for specific items where his input would be helpful for example discussing results that support bonus outcomes etc.