IA to target unfair director pension payments

The Investment Association (IA) will target companies paying newly-appointed directors pension contributions at rates above the majority of their workforce.

In its 2019 annual general meeting (AGM) season, IA plans to highlight offenders in an attempt to ensure that new executive directors receive a contribution in line with most of their workers.

IA will use its Institutional Voting Information Service (IVIS), which provides corporate governance research to shareholders to aid their voting decisions, to 'red-top' the companies paying unfair pension contribution rates.

A 'red-top' is the highest warning level that IVIS can issue, and is used where company shareholders should have “the most significant and serious concerns”.

Commenting on the announcement, IA director of stewardship and corporate governance, Andrew Ninian said: “The IA’s Remuneration Principles set out shareholder expectations on executive pension contributions and our members have been clear this is an issue of fairness and pension contributions should be aligned with the majority of the workforce.

“The new IVIS approach reflects our members’ view that newly appointed directors should receive a pension contribution equal to that of the majority of the workforce. IVIS will highlight those companies that pay higher pension contributions to newly appointed directors.”

IA also plans to 'red-top' firms with zero or one female board member to encourage diversity, while issuing an 'amber-top' to companies it believes are not on course to meet the Hampton-Alexander review, which requires boards to be 33 per cent female.

Furthermore, firms with women representing less than 25 per cent of its board will be highlighted by IVIS.

Ninian concluded: “Evidence clearly shows that more diverse boardrooms make better decisions. Investors want to see greater diversity in the companies they invest in to ensure our savers and investors are getting the best returns possible.”

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