Updated guidance addresses heightened concern over executive pay in listed companies
The Association of British Insurers (ABI) issued its revised “Principles of Remuneration” today. This is the latest iteration of a document that has developed over the past 30 years and which “sets out members’ views on the role of shareholders and directors in relation to remuneration and the manner in which remuneration should be determined and structured”.
The Principles are aimed mainly at companies whose shares are admitted to trading on the Main Market of the London Stock Exchange, but are also useful for other publicly-traded companies and large private companies. They consist of a over-arching principles, detailed guidance on the fixed and variable elements of remuneration, and additional appendices containing guidance on the operation of incentive schemes.
The accompanying ABI press release highlights that in following the Principles, companies should:
“Support appropriate rewards for exceptional performance
Strongly resist any payment for failure
Understand that excessive or undeserved remuneration undermines the efficient operation of the company, adversely affects its reputation and is not aligned with shareholder interests
Not engage in crude benchmarking when seeking to justify increases.”
Last week the Department for Business, Innovation and Skills published a discussion paper on executive remuneration which seeks to address “concens about executive pay”, the “recent financial crisis [having] made shareholders, the public and Government more acutely aware of the issue and more critical of perverse incentives or excessive levels of reward”. We discuss the BIS paper in this post.
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