Critical Analysis of Green Bury Report

This report was published in July 1995 under the chairmanship of Sir Richard Green bury and this report form many guidance associated with the Directors  Remuneration  and more specifically its disclosure in company annual reports. As a Consequence of this report certain rules were amended to need full disclosure of director’s remuneration   as well as pension right and shareholder agreement to the long-term plans and incentives. The London stock exchange embraces the guidance of Green burry and included its guidance into the UK listing rules.

Major Areas in Green Bury Report

  1. Remuneration Committee
  2. Disclosure and approval provision
  3. Remuneration policy
  4. Service contracts and compensations 

Main Recommendations in Green Burry

  • Like the Cadbury report the Green Bury report also suggested the establishment of remuneration committee consisting of entirely non-executive directors, who shall set the remuneration for executive and directors.
  • The appointment of the executive directors should be on the basis of contract for 12 months, so that the risk of Payoff should be reduced. Because as in Cadbury report the appointment period for executive was 3 years and due to which there was risk of Payoff.
  • Share options allowed to the directors on the basis of their remuneration Plan should not be issued at discount.
  • There should be specific Guidance for determining a remuneration policy for directors.
  • There should be Service contracts and provisions binding the company to pay compensation to directors particularly in the event of dismissal.
  • There should be required level of disclosure needed by shareholder regarding details of directors remuneration and it should be also mentioned that whether shareholder approval is required or not.

Responses to the Green Bury Report

As the Green bury report demands a satisfactory performance criteria for all bonus schemes .So on this point of the report people response as that the green bury report did not specify guidelines for what basically satisfactory performance consist of. And also that the report did not specify the short term incentives from those of long term incentives.  In the recommendation its mentioned that shareholder approval is needed for long term incentive plan; so about this point of the people commented that Green bury report did not mentioned that shareholder approval is also required for short term incentive plans. In Green Bury Generally open ended language is used. And about the bonus it’s also said that there should be upper limits in the bonuses.

financial reporting and analysis

November 18, 2018