Revised executive pay principles – Investment Association

The Investment Association (IA) has published revised principles of remuneration in an open letter to the chairs of FTSE 350 remuneration committees. This year’s revisions introduce two new requirements:

  • Any relocation benefits should be disclosed at the time of appointment and only be paid for a limited period.
  • Annual bonus targets should be disclosed within 12 months of payment and a portion of any bonus should be deferred if the bonus is greater than 100% of salary.

The principles, which are tweaked annually to reflect current best practice, are accompanied by a letter outlining areas that IA members will focus on during the 2018 AGM season, including seeking to extend to FTSE 350 corporates the restraint in bonuses witnessed this year amongst the UK’s top 20 companies.

IA members will also seek greater transparency around bonus targets and will also expect companies to disclose pay ratios between the CEO and the median employee. Investors will also continue to support companies aligning incentive arrangements with the long-term strategy of the business.

Andrew Ninian, Director of Stewardship and Corporate Governance at the Investment Association, said:

‘This year’s AGM season saw investors flex their muscles and hold big business to account. A majority of FTSE 350 companies sought shareholder approval for their new pay policies and many of the UK’s top 20 companies have started to address investors’ concerns on executive pay levels. We now expect this trend to be extended across the wider FTSE, with more companies showing restraint on bonuses, long-term incentives and overall executive pay levels.’
‘The Investment Association Principles of Remuneration’, November 2017 [PDF]:www.theinvestmentassociation.org/assets/files/ivis/20171103- ER - Principles of Remuneration 2018.pdf