Boards need to understand and agree with the philosophy behind the Remco’s remuneration principles and be satisfied that bonus and LTIP targets are truly linking potential outcomes to company strategy and performance.

Remcos need to consider worked examples of the different share-based outcomes so that they are fully aware of the figures. That is really the only way Remcos can say that the projected levels of pay would be justified by the required performance.

Remcos should consider setting an overall absolute limit on the pay-outs and/or have full discretion to reduce them due to the company’s performance, or prevailing conditions at payment. They should also have comprehensive clawback arrangements to recover payments made.

Remcos should also not shy away from considering whether longterm performance measures are really appropriate for the company’s business. In 2016, an Investment Association-led working group suggested that companies should choose the pay structures which suit their businesses best, including awarding restricted shares with no performance measures but with significantly reduced size of awards (by at least 50%, compared to the LTIP award). So far, few companies have adopted this approach. That is largely because shareholders have not thought that the particular company’s proposed discount was sufficient. But the time may now be right to reconsider restricted shares: they provide certainty of outcome, allow reducing quantum and would eliminate the criticism that LTIP awards do not link pay to performance properly and result in inappropriate pay-outs.

Although generally considered as an imperfect and possibly unfair tool, the disclosure of CEO: UK employee pay ratio is becoming a reality. Disclosure will be mandatory. Boards need to consider the narrative explanation accompanying the ratio to both contextualise it and reduce the risk of anyone misrepresenting the statistics. Boards may need to explain or change your overall approach on pay policies across the company. This could be done as part of strengthening the workforce voice.

So what can you expect in 2018?

The focus on board pay in the context of fairness and trust in businesses will certainly continue. Companies will be expected to show restraint on board pay and to reduce it where necessary. This is also in boards’ interests. If they do not, the public register and CEO ratio disclosure will bring unwelcome attention and send the wrong message within their own businesses. And, as the current various bonus rows show, they could well end up with unwanted, possibly unfair, criticisms and resignations.