March brought some interesting developments to UK corporate governance issues, with the publication of the final Hutton report on fair pay in the public sector and the launch of a consultation on proposed amendments to the Takeover Code.
The Hutton Report
On 15 March 2011, the Treasury published the final Hutton report on fair pay in the public sector. This follows the interim report published on 1 December 2010. Although the majority of the recommendations set out in the final report relate to public sector companies, the report includes the following recommendations for private sector companies:
- Listed companies should be required to publish, monitor and explain top to median pay multiples in annual reports from January 2012.
- Companies delivering public services or supplying the public sector should apply the proposed 'fair pay code'. The code brings together various measures recommended in the report, including the disclosure of pay and details of executives' roles and linkage of pay to performance.
The Government announced in the Budget that it accepted the recommendations in the final Hutton report as a basis for consultation with public sector workers, trades unions and others and that it will set out proposals in the autumn that are affordable, sustainable and fair to both the public sector and the taxpayer. We will have to wait until then to see whether the Government pursues the recommendations for private sector companies.
Takeover Code Consultation
Following widespread criticism of the UK takeover regime as a result of Kraft Foods' takeover of Cadbury in 2010, the Code Committee of the Takeover Panel has launched a public consultation seeking views on proposed amendments to the Takeover Code.
The consultation includes a number of proposed amendments to the Code in order to provide greater recognition of the interests of the employees of the offeree by improving the quality of disclosure by offerors and offeree companies in relation to the offeror's intentions regarding the offeree and its employees and improving the ability of employee representatives to make their views known.
The proposals include:
- requiring the offeror to set out its intentions with regard to the employees, including any material changes in their conditions and, if appropriate, a statement that it does not intend to make any changes;
- holding the parties to any statements that they make during the offer period for at least 12 months, for example any statements by the offeror company regarding any course of action that it intends to take or not to take, such as a statement that it will not carry out any redundancies;
- expressly stating that the employee representatives should receive certain documents; and
- making it clear that the Code does not prevent the passing of information in confidence during the offer period to employee representatives.
The consultation closes on 27 May 2011.