FRC: Guidance on non-executive director remuneration to support good governance updated

On 5 November 2025, the Financial Reporting Council (FRC) published an update to the Remuneration section (Section 5) of its Corporate Governance Code Guidance (Guidance) to clarify the approach to share-based remuneration for non-executive directors.  

First published in January 2024 and updated from time to time, the Guidance supports the UK Corporate Governance Code 2024 and it  makes clear that the  “Comply or Explain” principle  provides companies with flexibility to structure non-executive director (NED) remuneration.

Two new paragraphs have been added to the NED remuneration part of Section 5 of the Guidance. The first provides clarity on how companies can structure NED remuneration, recognising that companies may encourage non-executive directors to build personal shareholdings to foster alignment with shareholders and reinforce long-term commitment, whilst emphasising that any approach must be tailored to the specific circumstances of each company. 

The second new paragraph makes clear that companies can consider alternative remuneration structures, but in doing so must take care to preserve director independence.  As a result, the Guidance states that performance related remuneration is not appropriate, as it may compromise the NED’s ability to provide oversight and challenge when considering executive decisions. 

If companies do consider offering independent NEDs options or similar rights to acquire shares, they should not be performance related (for example, they should not have a meaningful exercise price which would impair director independence). The Guidance states that in all circumstances, care should be taken to ensure the structure does not incentivise short-term decision making, create conflicts of interest or impair independence, in line with Provision 10 of the UK Corporate Governance Code 2024.

Companies are encouraged to set out the approach to NED remuneration in their annual report.

(FRC, FRC updates guidance on non-executive director remuneration to support good governance, 05.11.2025)

Parliament: The Companies (Directors’ Report) (Payment Reporting) Regulations 2025 No. 1152

The Companies (Directors’ Report) (Payment Reporting) Regulations 2025 were made on 30 October 2025 and come into force on 1 January 2026. They will apply in respect of a company's financial year beginning on or after 1 January 2026 

These Regulations amend the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (S.I. 2008/410) and new reporting requirements for large companies to annually report on their payment practices and performance with respect to suppliers within their Directors’ Reports. 

They were issued in draft in July 2025 and further details on their content are here.

The Government is publishing updated guidance for large businesses in scope of the duty on how to comply.

(The Companies (Directors’ Report) (Payment Reporting) Regulations 2025 No. 1152 and Explanatory Memorandum, 30.10.2025)