In brief

ISS

On 4 November 2022, Institutional Shareholder Services (ISS) published its 2023 benchmark policy consultation, seeking views on its proposed amended voting policies for 2023. For the UK, with respect to remuneration, the ISS is seeking views on:

  • Salary increases: A change to the ISS policy on remuneration so that annual increases in executive salary will be expected to be low and lower proportionately than general increases across the broader workforce. Any increase to salary levels should be considered in tandem with the effect this will have on overall quantum. Any "catch-up" increases to reflect earlier pay freezes shall continue to be unsupported by the ISS.

The ISS expects to announce its final 2023 benchmark policy changes in early December and the revised policies, which apply to shareholder meetings on or after 1 February 2023.

FRC

On 3 November 2022, the FRC published its annual review of corporate governance assessing the quality of reporting against the UK Corporate Governance Code. With respect to remuneration:

  • Alignment of remuneration with company strategy: the FRC found that the quality of reporting about alignment of executive remuneration with company's purpose and values continues to be of concern. The FRC emphasised that the link between remuneration, company strategy, purpose and values should be transparent and clearly disclosed. For annual bonuses and LTIPs, annual reports should explain the rationale for each performance metric, include weightings as well as the target achievements, link to the company's strategy and KPIs and how this translates into granted awards.
  • Shareholder engagement: The FRC also found room for improvement in reporting engagement with shareholders and stakeholders on remuneration, including when the engagement took place and how and the impact that the engagement had on remuneration policy and outcomes.

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