Shareholder votes on executive pay packages should only become binding if a company fails to secure the necessary threshold of votes in two consecutive years. In a response to the Department for Business Innovation and Skills’s consultation on executive compensation, James Barty says the government’s proposals to make shareholder votes on remuneration policy binding is an overreaction.

Instead the UK should replicate the Australian model which gives companies a year to revise its policy if a certain percentage of shareholders voted against the remuneration package. If the company failed to win over the minimum shareholder approval the following year, the vote would then become binding.

We are grateful to DLA Piper for providing guidance on the legal aspects of the BIS consultation paper.