U.K. Executive Pay in Crosshairs as Investors Demand Restraint
A leading industry group for asset managers has urged companies that received financial support from the U.K. government to limit executive pay and bonuses this year.
The Investment Association, whose 250 members manage 8.5 trillion pounds ($11.4 trillion) of assets, made the demand on Friday in a letter that was sent to FTSE 350 companies.
“Consideration of the wider stakeholder experience when deciding executive remuneration outcomes will continue to be a critical investor expectation as the effects of the pandemic and its aftermath are felt,” the association said in the letter, which was seen by Bloomberg News. The group is demanding that companies “show restraint where they have taken and not repaid government support.”
Executive pay is under growing scrutiny as asset managers like BlackRock Inc. and activist firms including Cevian Capital AB take an increasingly hands-on role in dictating how the companies they hold conduct themselves. The issue of C-suite pay, in particular, has emerged as a particularly sensitive one after a number of companies sought government bailouts to cope with the fallout from the pandemic, which included laying off staff.
The U.K. had spent 69 billion pounds ($95 billion) to cover the wages of furloughed workers by the time the program came to an end in September, according to government figures. At the same time, senior business leaders at some of companies to receive such aid took home millions of dollars in compensation.
The letter also calls for FTSE businesses to factor in how successful companies are at tackling issues like climate change when deciding executive pay. Such “material ESG risks” need to be taken into account, according to the letter.
“With COP26 focusing minds ever more sharply on climate change, and more and more companies rightly linking executive pay and bonuses to ESG targets, investment managers will be watching closely to ensure these targets are both quantifiable, and linked to the company’s strategy,” said Andrew Ninian, Director of Stewardship and Corporate Governance at the Investment Association.
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