On 6 November 2017, the IA published an open letter to all FTSE 350 companies outlining key changes to The Investment Association Principles of Remuneration for 2018 (Principles).

The letter highlights changes in areas such as:

  • Relocation benefits—these should now be disclosed at the time of appointment, be in place for a limited time and be fully detailed in the Remuneration Report; and
  • Annual bonus—there is a requirement that bonus targets are disclosed within twelve months of the bonus payment, and that deferral is expected for any bonus opportunity greater than 100% of salary.

In addition, the letter emphasises certain aspects of the Principles to be considered for the 2018 AGM season, such as:

  • Levels of remuneration—companies must adequately justify to investors the level of remuneration paid to executives, and take into account the wider social context of executive pay, rather than looking at benchmarking alone.
  • Shareholder consultation—dialogue with shareholders on executive remuneration could be improved. Companies who withdraw resolutions prior to the AGM should ensure that they conduct a full analysis of shareholder feedback and consult further before re-submitting their Remuneration Policies.
  • Pay for Performance—fund managers will be seeking greater transparency on both financial and non-financial bonus targets to ensure pay is in line with performance.
  • Accountability of Remuneration Committee Chairs—investors are increasingly voting against the re-election of individual directors based on the decisions they make at the Remuneration Committee, and investors have a range of escalation approaches to voting policies here.

The press release containing links to the open letter and the principles can be found here:

  • https://www.theinvestmentassociation.org/media-centre/press-releases/2017/ia-publishes-pay-principles-for-ftse-companies-ahead-of-2018-agm-season.html

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