Against a backdrop of societal concern about pay gaps between those at the top and ordinary workers, pension funds, other investors, government and the EU have been reviewing the effectiveness of corporate governance. There has been a significant focus on the issue of executive remuneration by investors, regulators and politicians.
The 2013 Enterprise and Regulatory Reform Act enhanced shareholder oversight of directors’ pay and provided them with a binding vote on a company’s remuneration policy. In Summer 2016, the Prime Minister announced new proposals to further empower shareholders in this area.
We are supportive of the Government’s interest in this area; If we are to make progress on executive remuneration, it is critical that companies explain clearly how their remuneration policy is structured, how it is linked to performance and how that impacts shareholder value.
In 2013, the Pensions and Lifetime Savings Association together with Hermes EOS, USS Investment Management and RPMI Railpen published our Remuneration principles for building and reinforcing long-term business success. These Principles provide a framework for companies to utilise in considering how they might align pay more closely with the interests of their long-term owners in order to position themselves best for future success. We also review and update the PLSA Corporate Governance Policy and Voting Guidelines annually, while our annual AGM report analyses shareholder votes on executive remuneration-related resolutions at company AGMs.