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Remuneration report shortcomings at Mears, Lloyds

Mears Group,  which moved its listing from AIM to the Official List in June 2008, has fallen significantly short of the requirements of the UK Companies Act in the drafting of its remuneration report for the 2008 financial year.

As a main market company, Mears is now obliged to meet the requirements of Schedule 7A of the Companies Act 1985, as inserted by the Director Remuneration Report Regulations.

Manifest found disclosure of the remuneration for the executives and the long-term incentives to be lacking, in particular:

  • The Remuneration Report is not signed, in a breach of S243A Companies Act 1985.
  • Disclosure about the directors’ defined contribution pensions does not meet the requirements of s12(3) of Schedule 7A.
  • Notice periods or severance provisions are not disclosed, in breach of section 5 of Schedule 7A of the Companies Act 1985.

It is not the only company to fail to meet the legal requirements in recent weeks, as the remuneration report Lloyds Banking Group omitted ‘the market price of each of those shares when the scheme interest vested’ for each of the shares vesting under its Performance Share Plan (page 92 of the annual report). This information is required to be disclosed under section 11 (3)(d) of Schedule 7A of the Companies Act 1985. This technical breach aside, Lloyds has made significant and welcome remuneration policy changes – in particular the introduction of mandatory deferral and clawback provisions in the annual incentive and the replacement of TSR by economic profit as one of the performance metrics for the LTIP.

What do you think?