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Remuneration Policies and Baronsmead VCT 3

The new Enterprise Regulatory Reform Act requires public companies to take a vote on Remuneration Policy, i.e. a forwarded looking binding vote for the next three years, as opposed to the non-binding retrospective one on the Remuneration Report with which we are all familiar. The latter will still be present, and investors might worry that the former will be a long-winded and tedious document that they will need to plough through (rather like the multi-page Remuneration Reports from large companies).

There have of course not yet been many such policies published because few Annual Reports have yet been produced for the forthcoming AGM season. But Baronsmead VCT 3 have done so and this is what it says:

The Board’s policy is that the remuneration of non-executive Directors should reflect the experience of the Board as a whole, be fair and comparable to that of other relevant venture capital trusts that are similar in size and have similar investment objectives and structures. Furthermore the level of remuneration should be sufficient to attract and retain the Directors needed to oversee properly the Company and to reflect the specific circumstances of the Company, the duties and responsibilities of the Directors and the value and amount of time committed to the Company’s affairs.”

That’s pretty much it (and there are no executive Directors in such companies of course), other than a few more details of no pension, no bonuses and the directors do not have service contracts so there is no policy on termination payments – that wouldn’t stop them being paid under this “policy” statement though.

Such a Remuneration Policy gives very broad discretion as to what the board is in practice paid, and it would be difficult to argue that any actual payments breach those policies.

Surely it was not the intention of the Act that such boiler-plate and unspecific policies be put to shareholders for approval? This is clearly something shareholders will need to look out for in the coming few months, and consider voting against those Remuneration Policies that are as trivial as those in Baronsmead VCT 3.

Roger Lawson

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