Renewed focus on directors' entitlements


When the Greenbury Report on directors' remuneration was published in July 1995, the immediate focus of attention was on the implications for directors' pay and share plans. However, it may well be that the greatest impact will be the proposals regarding directors' pensions provisions.

The Greenbury recommendations on pensions (which only apply to companies listed on the London Stock Exchange and incorporated in the UK) fall into two categories:

1. The terms of the plan benefits

The main recommendation regarding the benefits to be provided is that bonuses and benefits in kind should not be pensionable.

2. Disclosure of the cost of providing plan benefits

Cost of pension benefits should be identified on an individual, named basis. The disclosed cost should reflect the increase in benefits during the year under review

Requirements for Irish Companies

The Irish Stock Exchange has recently issued rules which replace the London Stock Exchange rules and apply to companies incorporated in Ireland and listed on the Irish Stock Exchange. The principal ones are:

. The Irish Exchange has opted for aggregate disclosure of directors' remuneration broken down between executive and non-executive directors as opposed to the London requirement of disclosure on an individual named basis.

. The Irish rules require pensions disclosure for accounting periods ending on or after December 31st 1995.

. The Best Practice provisions of the Irish Exchange, which come into effect for accounting periods beginning on or after December 31st, 1995 state that "in general, neither annual bonuses nor benefits in kind should be pensionable".

However, the annual report and accounts must include a report which, amongst other things, must contain explanation and justification of any element of remuneration other than basic salary which is pensionable. Confusingly, this provision comes into effect for accounting periods ending on or after December 31st, 1995.

. The Irish rules are not specific in relation to how pensions costs should be calculated. However, it appears that the Irish Stock Exchange will closely follow the basis that is eventually agreed in the UK.


Quoted companies will need to immediately review the earnings on which pensions are based for directors. It remains to be seen what approach the Irish Stock Exchange takes with regard to the determination of costs to be disclosed. The approaches currently under consideration could lead to the publication of some very high figures.

The publication of the first company reports to disclose director pension costs is certain to generate a lot of media coverage.