Remuneration Committee

Executives should not decide their own pay. The remuneration committee, called the compensation committee in the United States, designs and approves executive pay, including salaries, bonuses, long-term incentive plans, pensions and benefits.

The committee aims to attract and retain talented leaders while linking pay to performance and long-term shareholder value. It typically sets performance targets for bonuses and share awards, considers pay levels at comparable companies and wider employee pay, and decides whether targets have been met.

For example, a remuneration committee might decide that a chief executive’s annual bonus depends on meeting profit and safety targets, and that long-term share awards vest only if the company’s shareholder returns beat those of its peers over three years.

Executive pay is often controversial, and committees face scrutiny from shareholders, the media and employees. Many countries require companies to publish a detailed remuneration report and give shareholders a vote on pay, known as say on pay. Committees often use independent pay consultants to support their decisions.