Definition
The Greenbury Report is a fundamental document on corporate governance produced in 1995 by a committee led by Sir Richard Greenbury. The report focuses on executive remuneration and stresses the importance of having a remuneration committee composed of non-executive directors. This committee should oversee the disclosure of remuneration policies in the annual report and accounts, and ensure notice and contract periods are limited to less than one year.
Examples
- Remuneration Policy Disclosure: A company provides a detailed section in its annual report outlining its executive compensation strategy, ensuring stakeholders understand how executives are incentivized.
- Remuneration Committee Composition: XYZ Corporation has established a remuneration committee comprised solely of non-executive directors to approve and review executive pay packages to elimina regulatory and ethical conflicts.
- Contract Length Limitation: ABC Ltd. sets the maximum contract period for top executives at 12 months, aligning with the Greenbury Report’s recommendations to increase managerial accountability.
Frequently Asked Questions (FAQs)
What is the primary focus of the Greenbury Report?
The Greenbury Report primarily focuses on corporate governance concerning executive remuneration, ensuring transparency, fairness, and accountability.
Who was responsible for issuing the Greenbury Report?
Sir Richard Greenbury chaired the committee that issued the Greenbury Report in 1995.
How does the Greenbury Report impact executive pay?
The Greenbury Report recommends oversight of executive pay by a committee of non-executive directors, and calls for greater transparency in remuneration policies disclosed in annual reports.
What did the Greenbury Report suggest about notice and contract periods?
The Greenbury Report suggested that notice and contract periods for executives should be restricted to less than one year.
Is the Greenbury Report still relevant today?
Yes, many of its recommendations have been incorporated into the Corporate Governance Code, which continues to influence corporate governance standards.
Related Terms with Definitions
Corporate Governance
Corporate governance refers to the system of rules, practices, and processes by which a company is directed and controlled, balancing the interests of stakeholders such as shareholders, management, customers, suppliers, financiers, government, and the community.
Cadbury Report
The Cadbury Report (1992) is a foundational document on corporate governance in the UK, which emphasized the importance of the board of directors and outlined principles for financial transparency.
Remuneration Committee
A remuneration committee is a subgroup of non-executive directors within a company’s board responsible for setting executive pay and ensuring that the remuneration practices align with shareholder interests.
Non-executive Directors
Non-executive directors are board members who do not engage in the day-to-day operations of a company. They provide oversight and contribute to the strategic direction and governance of the organization.
Corporate Governance Code
The Corporate Governance Code provides principles and provisions for UK companies’ governance structures, practices, and policies, promoting accountability, transparency, and sustainable success.
Online References
- Corporate Governance Interaction: UK Corporate Governance Code
- The Greenbury Report Summary
- Historical Perspective on Governance Reports: Cadbury to Greenbury
Suggested Books for Further Studies
- “Corporate Governance: Principles, Policies, and Practices” by Bob Tricker
- “Corporate Governance and Accountability” by Jill Solomon
- “Corporate Governance: A Practical Guide” by Michael Powell
- “Understanding and Implementing the Greenbury Report” by John Knox
Accounting Basics: “Greenbury Report” Fundamentals Quiz
Thank you for delving into our examination of the Greenbury Report and trying out our rigorous sample quiz questions. Continue to aim high in your mastery of corporate finance and governance!
