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Institutional investors in Britain’s biggest public companies are to pave the way for bigger boardroom pay packages amid arguments from corporate chiefs that “restraint” over remuneration is causing irreversible damage to London’s stock market.
Sky News has obtained the draft of a letter from the Investment Association, whose members collectively manage £8.8trn in assets, to the chairs of FTSE 350 remuneration committees in which it signals a significant change in its stance towards bosses’ pay.
In the letter, which is expected to be released publicly within days, the IA says it intends to conduct a “fundamental review of the Principles of Remuneration [later this year] … reflecting the evolving member expectations on remuneration and feedback from companies”.
The IA said it acknowledged feedback from companies – particularly the largest in the FTSE 100 – that they were finding it increasingly challenging to “attract US executives and compete in the US market” because of the gulf between pay deals for bosses working for London and New York-listed businesses.
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The letter also highlights a growing desire from British companies to introduce so-called hybrid incentive schemes comprising both restricted stock and long-term share awards.
“These global companies are able to use such schemes in the US and other jurisdictions and feel such structures should be used for their executives,” the draft letter says.
The investor body flagged concerns raised by companies that the range of measures – such as malus, clawback and post-employment shareholding requirements – designed to prevent high pay packages being awarded without appropriate long-term evidence of strong financial performance may have gone too far.
“Individually, they are accepted as a means to increase the long-term alignment of executives and shareholders but in aggregate there may be a view that the perceived impact on…
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