What are you looking for?

Executive Remuneration Working Group issues Interim Report

Thursday 21 April 2016

The Executive Remuneration Working Group has today issued an Interim Report as part of its drive to simplify and improve pay practices at UK listed companies.

The Working Group, which includes representatives of companies, investors and asset owners, has made a series of proposals ahead of a consultation, to take place in the coming weeks.

The proposals are centred on resetting the expectations both of listed companies and investment managers around pay structures, to overhaul the current dominance of Long-Term Investment Plans (LTIPs), which often result in a poor alignment of interests between executives and shareholders.

The Working Group argues we should move away from the current ‘one-size-fits-all model’, and that a range of other options should be considered by companies when deciding on executive pay structures, based on their own business strategies and circumstances. These options might include a simple restricted shares awards scheme.

Pay-setting should be carried out within a clear and simple structure that calls for alignment with shareholders’ interests, recognition of company performance, the implementation of a long-term strategy and which is consistent with the approach for other employees.

The Interim Report will now form the basis of a series of roundtable discussions with stakeholders across the investment chain.

The Investment Association, which helped to establish the independent Working Group and provides the secretariat, has informed the working group it will review promptly whether to adopt its eventual final recommendations in its Principles of Remuneration.

Nigel Wilson, Chairman of the Executive Remuneration Working Group, said:

“The current approach to executive pay in UK listed companies is not fit for purpose, and has resulted in a poor of alignment of interests between executives, shareholders and the company.

“Greater transparency, clearer alignment of shareholder, company and executive interests, more accountability on the part of Remuneration Committees and greater engagement with and control by shareholders, working through company boards, are vital to restore confidence in a system widely seen as broken.”

-ENDS-

For further information please contact:

John Kenchington
Director of Communications
John.Kenchington@theia.org
T 020 7269 4629
M 07834 089 332

Linsey White
Head of Media Relations
linsey.white@theia.org
+44 (0)20 7269 4635
+44 (0)7508 724 022

Notes to editors:

The Executive Remuneration Working Group is an independent panel of experts set up last year to review pay structures at UK listed companies. The Investment Association provides secretariat services to the Working Group.

The panellists are:

  • Russell King, Remuneration Committee Chairman, Aggreko PLC and Spectris PLC
  • Helena Morrissey, Chief Executive, Newton Investment Management and Chair, The Investment Association
  • Edmund Truell, Chairman, Strategic Advisory Board of Lancashire and London Pensions Partnership
  • David Tyler, Chairman, J Sainsbury PLC and Hammerson Plc
  • Nigel Wilson, Group Chief Executive, Legal & General Group PLC.

About the Investment Association:

  • The Investment Association is the trade body that represents UK investment managers who manage over £5.5 trillion on behalf of clients.
  • Our purpose is to ensure investment managers are in the best possible position to:
    • Build people’s resilience to financial adversity
    • Help people achieve their financial aspirations
    • Enable people to maintain a decent standard of living as they grow older
    • Contribute to economic growth through the efficient allocation of capital
  • The money our members manage is in a wide variety of investment vehicles including authorised investment funds, pension funds and stocks and shares ISAs.
  • The UK is the second largest investment management centre in the world, after the US and manages 37% of all assets managed in Europe.
  • Our website includes an area for consumers which explains why it’s important to invest and how you can invest in a fund.