Directors at large companies have been put on notice that investors will push for simpler and clearer pay structures from next year, in an attempt to ward off more stringent government rules on remuneration.
The Investment Association has written to all FTSE 350 businesses with its latest set of principles on executive pay, after more than a year of work on the subject.
One of the political flashpoints for companies is the disparity between average wages and those of senior staff. The IA has echoed Prime Minister Theresa May’s call for firms to reveal the multiples of median salaries awarded to top executives each year, and has asked that companies justify the sums.
“The Investment Association and its members felt that it was vital to rebuild trust and update our principles to ensure that we are not only acting as responsible stewards for our clients but also show that we are aligned with the current climate,” said Andrew Ninian, director of corporate governance at the IA, whose members manage £5.7 trillion in assets.
“The increasing complexity of remuneration structures has been the driving force behind these issues and our new Principles are designed to offer a market-based solution to add simplicity and flexibility.”
A series of high-profile investor rebellions over executive pay in recent years have shifted policy at some companies. BP promised to overhaul its pay structures after almost 60pc voted against boss Bob Dudley’s pay packet in April, while others including WPP have defended their bonuses in the face of investor dissent.