Process to determine remuneration

Disclosure focus

Disclosure 2-20 requires an organization to describe the process used to design its remuneration policies and to determine remuneration. Where the policy-design and remuneration-determination processes involve different bodies or approval routes, the organization should describe them separately.

The organization must report whether the process for determining remuneration is overseen by independent members of the highest governance body or by an independent remuneration committee. The term “Board” should be used only where the Board is the organization’s highest governance body. Non-executive status should not be treated automatically as evidence of independence.

The organization must describe how the views of stakeholders, including shareholders, regarding remuneration are sought and taken into consideration. The disclosure should identify the relevant stakeholder groups and engagement channels and explain how the views are reviewed or otherwise considered in the remuneration process. Stakeholder views do not have to result in a policy change, but the consideration process should be described.

The organization must report whether remuneration consultants are involved in determining remuneration. If consultants are involved, it must report whether they are independent of the organization, its highest governance body and its senior executives. External or legally separate status does not automatically demonstrate independence.

The organization must also report the results of stakeholder votes, including shareholder votes, on remuneration policies and proposals where such votes are applicable. The result should identify the proposal and the outcome. The organization can additionally explain whether the vote was binding or advisory and provide votes for, against, abstained or withheld where this is necessary for clarity.

Where no applicable vote took place, the organization can report this directly. Similarly, where stakeholder views are not sought, no remuneration consultant is used, or no independent oversight exists, the organization should report the actual arrangement rather than omit the element or imply that a process exists.

Remuneration policies generally help recruit, motivate and retain highest governance body members, senior executives and other employees. They can also support the organization’s strategy and contribution to sustainable development and align remuneration arrangements with stakeholder interests.

Disclosure 2-20 addresses the process for designing remuneration policies and determining remuneration. The content of the remuneration policies is reported under Disclosure 2-19, while annual total compensation ratios are reported under Disclosure 2-21.

Reasons for omission are permitted for Disclosure 2-20 where required information cannot be reported. However, the absence of a committee, stakeholder-consultation process, consultant or applicable vote should normally be reported directly as a factual response rather than treated as an omission.

This LRA educational guidance supports disclosure preparation. For the exact requirements, always refer to the official GRI source.