The Pensions and Lifetime Savings Association has called on investors to take a tougher stance on those who set executive pay policy.

In its updated edition of the Corporate Governance Policy and Voting Guidelines, the PLSA aims to promote the long-term success of companies in which PLSA members invest, and to make sure that the management and boards of these companies are accountable to shareholders, including pension funds.

Research by the PLSA found that 85 per cent of pension funds were concerned by the pay gap between executives and ordinary workers.

The guidelines have also recommended that companies should explain what steps they are taking to bring in diversity to the board and corporate culture, as well as suggesting that if shareholders vote against a company's remuneration policy, they should also oppose the re-election of the remuneration committee chair as a company director.

PLSA policy lead, stewardship and corporate governance Luke Hildyard said: “Provocative levels of executive pay are doing great damage to the reputation of British business. The failure of some companies to recognise stakeholder concerns on this issue is a major worry for pension funds as investors.

“Our new guidelines are designed to ensure the individuals responsible for a company’s executive pay practices are held to account. We hope that this can at last deliver meaningful progress on excessive top pay.”

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