The Pensions and Lifetime Savings Association (PLSA) called on investors to take a tougher stance on those who set executive pay policy.
The PLSA, formerly the National Association of Pension Funds, published an updated edition of its Corporate Governance Policy and Voting Guidelines. They aim to promote the long-term success of the companies in which the PLSA’s members invest and ensure that the board and management of these companies are held accountable to shareholders, such as pension funds.
The new guidelines recommend that if shareholders vote against a remuneration policy, they should also oppose the re-election of the remuneration committee chair as a company director.
The PLSA recently published research revealing that 85% of pension funds were concerned by the pay gap between executives and ordinary workers. The research also showed that while there were significant votes against pay practices at a number of quoted companies from the FTSE 350, there was little opposition to the re-election of the remuneration committee chairs.
Luke Hildyard, who leads on stewardship and corporate governance policy at the PLSA, said: “Provocative levels of executive pay are doing great damage to the reputation of British business. The failure of some companies to recognise stakeholder concerns on this issue is a major worry for pension funds as investors.
“Our new guidelines are designed to ensure the individuals responsible for a company’s executive pay practices are held to account. We hope that this can at last deliver meaningful progress on excessive top pay.”
The guidelines also call for companies to explain what they are doing to bring diversity to the boardroom and suggest that annual reports should include information about a company’s corporate culture and employment practices.