Employment issues

Directors' service contracts and remuneration

Directors are not, by virtue only of their office as director, automatically entitled under company law to remuneration for services as a director or to reimbursement for expenses incurred in rendering such services. Power to pay directors for fulfilling the function of director must be conferred by the articles. A director may also be contractually entitled to remuneration for services performed by virtue of an agreement with the company, such as a service contract in the case of an executive director.

In regard to directors' remuneration and service contracts, UK listed companies must also comply or explain non-compliance in relation to:

1. •

   the UK Corporate Governance Code, and

2. •

   institutional investor guidelines

In addition, the Companies Act 2006 (CA 2006) and related regulations require the company to produce a directors' remuneration report each financial year disclosing specified details relating to directors' remuneration.

Shareholders have a right to a binding vote to approve the directors' remuneration policy and, once so approved, all directors' remuneration must fall within the policy's scope. The remuneration policy must be put to shareholders whenever a new policy,