In September 2026, the Department for Business, Innovation, Science and Trade launched a consultation seeking views on how the UK’s corporate reporting framework could be modernised, including proposals to simplify the remuneration reporting regime.
Farient has reviewed the proposals and will respond to the consultation before it closes on 30 November 2026.
Summary
Farient broadly supports the UK government’s proposals to simplify reporting in the Directors’ Remuneration Report (DRR) while retaining a focus on strategic reporting and pay-for-performance alignment. Removal of some supplementary disclosures will improve the clarity of DRRs, enabling stakeholders to make better informed assessments, and reduce administrative burden on companies.
However, we challenge the proposal to remove the annual advisory vote on the DRR. We believe this could have unintended consequences and would make the UK an outlier globally. We also question the argument that it would materially reduce company time and resources, given that boards and reward teams would likely continue to engage with investors, and report on any contentious decisions during the year. An alternative approach could be to increase the time between Remuneration Policy votes from at least every three years to at least every four years, in line with some European jurisdictions such as Germany and the Netherlands.
We look forward to the publication of the consultation findings next year. The earliest implementation of the streamlined requirements would likely apply for reporting periods starting on or after 1 January 2028.
Whilst the government proposals are focused on the DRR disclosure requirements as set out under the Companies Act 2006, any simplification of the requirements should be reviewed in the context of additional provisions set out in the UK Listing Rules and the UK Corporate Governance Code, to ensure that they continue to work together. To help strengthen the international competitiveness of the UK market, Farient would support a further review of the UK Corporate Governance Code, including areas such as post-employment shareholding requirements and the five-year time horizons for long-term incentive (LTIP) awards.
Farient’s views on some of the key questions set out in the consultation are summarised below.
| ThemeConsultation question |
Farient View |
| Does the current scope for reporting (‘quoted companies’) remain appropriate?Question 42 |
- On balance, we believe the current scope for reporting requirements (‘quoted companies’) remains appropriate
- In our view, expanding the scope of the regulations to include private and AIM-listed companies would not be aligned with global practices or support the principle of improving the UK’s international competitiveness
- In terms of smaller companies, an alternative approach could be the introduction of a size threshold. For example, if a company falls below a certain market capitalisation they would not report under the full DRR regulations and there would be no annual advisory vote on the DRR
- This is aligned with the approach currently being consulted on in the US, with a proposal to scale back remuneration reporting and remove the say-on-pay vote for many listed companies (e.g. those with a market capitalisation below c.$2bn)
- Whilst a similar approach in the UK would represent a significant reduction in reporting obligations for smaller companies, there are some potential pitfalls, for example the impact of short-term share price volatility, or of moving in and out of the FTSE 250 or SmallCap index. On balance, this may add unnecessary complexity and create a ‘two-tier’ system
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| Do you agree or disagree with the proposal to remove the shareholders’ annual advisory vote on the DRR?Question 43 |
- We challenge the proposal to remove the annual advisory vote on the DRR. We believe this could have unintended consequences and would make the UK an outlier globally. We question the argument that it would materially reduce company time and resources
- In practice, we believe that companies will continue to engage with investors on potentially contentious decisions. In scenarios where investors are unsupportive of decisions made during the year, investors would find alternative ways to voice their dissent. This could be a vote against the Remuneration Committee chair and/or members, or the Chair of the Board, which could cause disruption to the operation of the board and potentially lead to more conservative decisions
- Greater focus on the Remuneration Policy vote could also result in investors looking to limit flexibility in the Policy – e.g. a push for salary caps or limitations on performance measures and weightings in incentive plans. This would go against the current direction of travel allowing greater trust in boards to set appropriate remuneration arrangements for executives
- In terms of removing administrative burden on companies, an alternative could be to increase the time between Remuneration Policy votes from at least every three years to at least every four years. In practice, shareholder engagement typically starts up to 18 months before the Policy vote, and renewals are often time intensive for companies. This would align with practice in some EU jurisdictions such as Germany and the Netherlands and potentially reduce risks of pay ratcheting
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| The government proposes to retain the existing methodologies for calculating the total single figure directors receive but are interested in ways in which they could be refined – for example, through the inclusion of a de minimis threshold. Do you agree or disagree with the proposal?Question 38 |
- On balance, we believe the total single figure disclosure provides a helpful summary of the remuneration earned by directors in the year and a useful year-on-year comparison. The methodology is well-established and generally well-understood by shareholders
- One challenge with the total single figure is that the headline number can often be misinterpreted and is not an accurate depiction of what executives receive. For example, a significant portion of the package is typically in the form of share awards which are not delivered until a later date due to bonus deferral and holding periods – with the value increasing or decreasing based on share price performance, and/or leaver provisions applying
- The consultation seeks views on how the existing methodology for calculating the total single figure could be refined. Farient’s view is that:
- Alternative approaches to LTIP disclosure could be explored, albeit we believe the current approach remains fit for purpose
- Methodologies around disclosure of alternative LTIPs could be clarified (e.g. treatment of market value share options)
Alternative approach to LTIP disclosure
- The current methodology reflects the value of LTIP awards at the point of vesting, as opposed to the value released to executives at the end of deferral or holding periods. Under this approach, high-performing companies which have achieved significant share-price growth over the period and high levels of LTIP vesting – can be subject to media attention around the single-figure number, notwithstanding that share awards remain subject to deferral and holding periods
- An alternative to consider could be to mirror the US approach, where LTIPs are shown on a fair-value basis, reflecting the value of the award at grant and adjusted to consider factors such as performance conditions
- Whilst there are pros and cons to both methodologies, the fair-value alternative could help to mitigate misleading media reporting and provide a way to compare remuneration packages across companies
Clarification of LTIP valuation methodologies
- Some areas of the single-figure methodology could be clarified further. While not a common approach in the UK market at present, we have seen some companies introduce market value options with no performance conditions during this AGM season. Under a strict interpretation of the current reporting rules, these awards arguably would not be captured in the single figure table, given their intrinsic value is zero at the time of grant. This does not feel in the spirit of the regulations and further clarity in this area would be welcomed
- There is also mixed practice among companies with restricted share plans in terms of when the awards should be included in the single figure table (i.e. at the point of grant or the point of vest). The regulations could be clarified in this area
De minimis threshold
- The consultation asks whether a de minimis threshold should be introduced. Farient believes a minimum threshold could be introduced for the benefits disclosure in the single-figure table. Shareholders are generally more focused on material benefits paid to executives (e.g. relocation allowances). However, given that companies will be required to calculate the taxable benefits for executives in any case, in practice this would not materially reduce the administrative burden
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| Do you agree or disagree with the government’s proposals to streamline the requirement to disclose information on directors’ accumulated shareholding interests in the company over time?Question 39 |
- We believe the section on directors’ shareholding is a useful reference for shareholders but could be streamlined
- We would suggest only including the aggregate shareholding of each director at the start and end of the year in the report, alongside confirmation of whether the individual’s shareholding requirement has been met
- The table showing the scheme interests awarded during the financial year could also be removed, given this information is available through other sources, for example, in Regulatory News Announcements (RNS)
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| Do you agree or disagree with the government’s proposals to remove these elements of the remuneration reporting in the directors’ remuneration report?Question 40 |
CEO-employee pay ratio
- Farient supports transparency around wider employee pay practices and believes this provides important context for Remuneration Committees when making decisions on executive pay
- The current pay-ratio reporting framework is deeply flawed: it imposes a significant administrative burden on companies and often provides limited value, particularly for large global companies with relatively small UK employee populations
- We are supportive of the removal of pay ratio reporting, albeit we believe some companies will choose to voluntarily disclose similar data, and that Remuneration Committees will continue to closely review workforce pay policies and practices
Relative importance of spend on pay; 50% share price appreciation scenario
- This information is not considered decision-useful for investors and wider stakeholders and Farient is supportive of its removal
Other disclosures: Remuneration committee activities and advisers; Shareholder engagement; Workforce pay alignment
- Companies often provide boilerplate reporting in these areas and in some years the disclosure is not necessary; for example, reporting on shareholder engagement in non-policy years with business-as-usual decisions
- Farient believes these elements of reporting could be removed, and companies should have the flexibility to voluntarily disclose where it is considered relevant. For example, if a company had a prior-year low vote, it might decide to include more information in the DRR on how it engaged with shareholders and responded to dissent
- Companies are likely to continue to provide relevant context around decisions made for executives; for example, how salary increases compare to the wider workforce rate, although if reporting requirements are streamlined in this area, it will be interesting to see how market practice evolves
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Looking Ahead
Farient’s view is that the consultation marks a major step in the ongoing evolution of UK corporate reporting and is supportive of many of the proposals that could significantly streamline remuneration disclosures. We will continue to engage with companies and investors to monitor views and how these are considered in the development of the final proposals.
Should you wish to discuss these updates or other market developments, please contact either Alison Barton (alison.barton@farient.com), Stephen Cahill (stephen.cahill@farient.com), David Cohen (david.cohen@farient.com), Fiona Maurice (fiona.maurice@farient.com) or Alex Styles-Morris (alex.styles-morris@farient.com).
