On the go: The Investment Association is increasing its crackdown on FTSE companies where executive pension contributions are not aligned to most of the workforce, according to its latest annual pay guidelines for FTSE companies.
In a letter to remuneration committees on November 9, the IA’s director for stewardship and corporate governance, Andrew Ninian, said that by the end of 2022, investment managers want pension contributions for executive directors to be aligned with those for the majority of the company’s workforce when expressed as a percentage of pay. This was set out in its previous annual pay guidelines.
However, while the IA noted that most companies are fully aligned, its Institutional Voting Information Service will issue a “red top” to remuneration policies or reports in 2023 where executive pension contributions are not aligned with most of the workforce.
Red topping is the trade body’s highest level of warning and is applied to companies that have the most serious corporate governance concerns.
In its latest pay guidelines, the IA also said that its members expect companies to disclose in their remuneration report the pension contribution rate which they consider to be given to the majority of the workforce, while the remuneration committee should explain how this rate has been derived.
In his letter to remuneration committees, Ninian urged committees to adopt additional restraint on pay and bonuses as many UK households, particularly lower-paid workers, struggle with the high inflationary environment.
Committees will need to delicately navigate the general economic uncertainty when judging 2022 remuneration outcomes and setting remuneration for 2023, the letter said, with Ninian noting the “restraint and good practice displayed by most FTSE 350 companies in awarding executive pay through the Covid pandemic”.
