The impact of the Salomon principle on directors’ remuneration in the UK

Purpose
This paper aims to examine the Salomon principle of separate legal personality and its impact on the regulation of directors’ remuneration in the UK. The aim of the paper is to explore the Salomon principle to determine whether it serves as a driving factor for directors’ remuneration levels. The paper will also examine the restrictive approach of the courts to move away from the principle and their reluctance to get involved in directors’ remuneration issues of a company. The paper explains the Salomon principle, describes the nature of the problem on directors’ remuneration and provides an analysis on how the Salomon principle impacts on the directors’ remuneration.

Design/methodology/approach
The paper reviews case law, statutory provisions and academic opinions on the directors’ remuneration and the concept of separate legal entity. The paper critically reviews the impact of the concept of separate entity on directors’ remuneration.

Findings
The paper finds that the courts are reluctant to come away from the concept of separate legal personality as well as reluctant to get involved with directors’ remuneration. This reluctance of the court makes the concept of separate legal personality to act as one of the drivers of directors’ remuneration.

Originality/value
The paper offers a different explanation into why directors’ remuneration continuous to be an issue in the UK. It points out that the concept of separate legal personality is a potential driver of directors’ remuneration in the UK.