THE GREENBURY REPORT (1995)

BY- DHARMENDRA KUMAR SINGH 12HM13

 CBI (Confederation of British Industry) formed group to

produce code in relation to directors remuneration under the chairmanship of Sir Richard Greenbury.

The committee was formed on 17th July 1995 after

widespread concern that excessive amount of remuneration is paid to the Directors of the some companies.

Also focused on the Directors whose performance had been

down but they still draw hefty pay packages from the company

Four main issues dealt with, as follows :

The role of a Remuneration Committee in setting the

remuneration packages for the CEO and other directors

The required level of disclosure needed by shareholders

regarding details of directors remuneration and whether there is the need to obtain shareholder approval directors

Specific guidelines for determining a remuneration policy for Service contracts and provisions binding the Company to pay
compensation to a director, particularly in the event of dismissal for unsatisfactory performance

Recommendations
THE REMUNERATION COMMITTEE Remuneration committee should consist of non-executive members who do not have any personal financial interest in the company Remuneration committee Chairmen should account directly to the shareholders The members of the remuneration committee should be listed each year in the committees report to shareholders

Recommendations
DISCLOSURE AND APPROVAL PROVISIONS
The remuneration committee should make a report each year to the shareholders on behalf of the Board. It should be the main vehicle through which the company accounts to shareholders for Directors remuneration.

The report should set out the Companys policy on executive remuneration, including levels, comparator groups of companies. individual components, performance criteria and measurement, pension provision, contracts of service and compensation commitments on early termination

Recommendations
REMUNERATION POLICY
Directors pay should be directly linked to the Companys performance. Remuneration committees must provide the packages needed to attract, retain and motivate Directors of the quality required but should avoid paying more than is necessary for this purpose. Committees should judge where to position their company relative to other companies. They should be aware what other comparable companies are paying and should take account of relative performance.
Performance Linked Pay

Recommendations
SERVICE CONTRACTS AND COMPENSATION
Remuneration committees should consider what compensation commitments their Directors contracts of service. Committees should take a robust line on payment of compensation where performance has been unsatisfactory and on reducing compensation to reflect departing Directors obligations to mitigate damages by earning money from elsewhere.

Thank you