Big bosses risk ‘shareholder revolt’ over pension entitlements

Pension contributions for company bosses must fall in line with the rest of the workforce or firms run the of risk shareholder rebellion, according to the Investment Association (IA).

In its updated guidelines, the 2018 Principles of Remuneration, published yesterday, 22 November, the IA said that director’s contributions should follow the “majority” of their employees, rather than giving “higher payments as a mechanism for increasing total remuneration”.

The updated guidelines were published after increasing investor concerns the firms are not responding to shareholders messages over pay.

In an open letter to the chair of the remuneration committees of the FTSE 350 companies, IA director of stewardship and corporate governance, Andrew Ninian, wrote: “While the vast majority of FTSE 350 companies develop and implement pay policies that align with savers and shareholders’ interests, a stubborn minority still do not respond to shareholder concerns.

“Our strengthened guidelines make clear that companies need to demonstrate more robustly the link between pay and company performance. If they don’t, they should brace themselves for more shareholder revolts in 2019.”

Other measures recommended by the IA included broadening the triggers which allows provisions to be clawed back, for directors to hold shares for two years after their departure to ensure they think of the long-term value of the company and to adopt pay ratio reporting requirements early.

According to IA, 61 firms were added onto the IA Public Register for shareholder revolts for pay-related resolutions, a 9 per cent rise on the previous year.

Of those, 15 are FTSE 100 companies, 23 are FTSE 250 companies and 23 FTSE Small cap companies.

Ninian added: ““Growing shareholder rebellions on executive pay in the 2018 AGM season should come as no surprise to firms that continue to ignore or side-line the concerns of investors. Our updated principles reinforce the crucial role investors play in holding big business to account.”

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