A working group on executive remuneration, including representatives from business and the investment community, is calling for pay-setting to be carried out within a clear and simple structure. In its interim report, the Executive Remuneration Working Group calls for an alignment between the interests of shareholders and company performance, and for executive pay to be set according to a long-term strategy that is consistent with the approach used for other employees in an organisation.
The Investment Association, which helped to establish the independent working group and provides the secretariat, has informed the working group it will review promptly whether to adopt its eventual final recommendations in its Principles of Remuneration. The interim report will form the basis of a series of roundtable discussions with stakeholders across the investment chain.
Nigel Wilson, chair of the working group, said:
‘The current approach to executive pay in UK listed companies is not fit for purpose, and has resulted in a poor alignment of interests between executives, shareholders and the company.’
The Institute of Directors has welcomed the report; its Director General Simon Walker, said:
‘Importantly, the report also recommends that pay policies for senior executives are consistent with the approach for other employees. This is a worthy intervention that, if adopted by the market, could go a long way to restoring trust in our largest companies.’