Executive Reward update  

In this briefing, we highlight key areas for Remuneration Committees to consider following the FRC’s March 2026 publication on Improving the quality of ‘comply or explain’ reporting - with a particular focus on executive remuneration disclosures and shareholder engagement. We believe that this is a welcome update, highlighting the purpose of the UK Corporate Governance Code as a framework for better board accountability – rather than a simple compliance or “box ticking” exercise. The Code’s flexibility allows companies to demonstrate governance tailored to their specific circumstances.

• Companies should disclose any departures from remuneration-related provisions of the UK Corporate Governance Code.
• Where the relevant provision does not suit the company’s circumstances, it should be made clear why an alternative remuneration arrangement has been adopted.
• The rationale for the approach taken should be linked to strategy, performance, long-term value creation and risk.
• Reporting should demonstrate “actions and outcomes, not just policies and procedures”, particularly in relation to pay decisions, discretion and incentive outcomes.
• Additionally, disclosures should state whether any departures are time-limited or ongoing, and when (if at all) the company intends to return to compliance.

• Companies should consider how remuneration-related explanations will be received by shareholders and proxy advisers in advance of the AGM.
• They should also ensure transparency by naming any relevant Code provisions that have not been followed and signposting where explanations can be found.
• Shareholder engagement can be used to test whether remuneration explanations are “clear and meaningful”.
• Good practice would also include reporting shareholder feedback, where appropriate, within remuneration disclosures.

• Be open to “explaining” where complying is not the optimal approach for the company.
• Ensure consistency between the remuneration policy, remuneration report and wider governance disclosures.
• Avoid ambiguity or boilerplate language in remuneration reporting. • Review RemCo decision-making to ensure explanations focus on outcomes and judgement, not just process.
• Keep RemCo terms of reference and reporting practices under review to reflect the flexible, principles-based nature of the Code.