“Pension funds have warned the FTSE 350 that shareholders will not tolerate unjustified executive rewards in the upcoming voting season, and have set out the pay guidelines they expect to see applied in 2013.
In a letter sent to the chairmen of FTSE 350 businesses, the National Association of Pension Funds (NAPF) warned that companies that have failed to create a strong link between executive rewards and performance should expect shareholders to repeat their concerns of spring 2012.
The NAPF also set out some guidelines it wants to see reflected in the pay policies set through 2013. These include capping executive base pay increases at inflation and keeping them in line with the rest of the workforce. Where this is not the case, companies should offer a sound explanation.
The NAPF also criticised the use of peer group benchmarking, where pay is set by comparing it to that of other executives from different companies. The NAPF believes this practice has contributed to the escalation of boardroom pay. It said boards should focus more on their own strategies and less on comparing themselves against their peers.read more »
Pension fund investors: “shares granted to executive directors should ideally be owned for at least ten years”
A group of pension fund investors – Hermes Equity Ownership Services, the National Association of Pension Funds, the BT Pension Scheme, RPMI Railpen and USS Investment Management – yesterday published a discussion document setting out guidance on executive directors remuneration. From the accompanying NAPF press release:
“The report sets out four principles to encourage companies to change their reward structures as they begin to think ahead to the introduction of the binding vote on remuneration policy next year.
The principles are:
1. Management should make a material long-term investment in shares of the businesses they manage. For example, shares granted to executive directors should ideally be owned for at least ten years, whether or not the executive is still in post. This would encourage succession planning and reduce the need for ‘golden hellos’ for new directors.read more »
On 4 December 2012 the National Association of Pension Funds issued revised corporate governance policies for:
- Main Market companies that follow the UK Corporate Governance Code;
- Smaller companies; and
- Investment companies.