UK Government, via Investment Ass’n, targets boardroom pay

Within the last few days the UK Government and the trade body that represents UK investment managers – the Investment Association – have jointly announced new measures they say are aimed at reining in boardroom pay at publicly-traded companies. 

In an announcement on Sunday, the IA announced that it would be in charge of overseeing what it called “the world’s first public register of its kind”, which would name those UK-listed companies that had experienced a 20% or greater opposition from their shareholders to their executive pay packages.

It said it was taking on the register in response to a request from UK business secretary Greg Clark, who, it noted, would unveil further details about the new measure today, alongside plans for a number of new laws designed to improve the way the UK’s largest companies are run.

The IA said the new register would be launched by the end of the year.

Those companies named on the register “will detail how they intend to address investors’ concerns”, the IA announcement went on.

The announcement comes in the wake of a number of  high-profile revolts by shareholders opposed to the pay packages being offered to company executives, as well as promises by prime minister Theresa May to crack down on the large and growing gap between average pay in the UK, and the pay of those who run its largest companies.

‘Not enough being done’: Pension fund managers

In a statement accompanying the IA’s announcement, IA chief executive Chris Cummings, pictured left, noted that the organisation’s members are responsible for looking after the pensions of 75% of UK households and own more than one third of the shares of the companies that comprise London Stock Exchange’s FTSE index, and that they “believe that not all company boards that receive big shareholder dissent are currently doing enough to address investor concerns”.

“This public register will help sharpen the focus on the those who must do more, enabling our members to hold the country’s biggest businesses to account and leading to better-run companies,” Cummings added.

“We look forward to working with Government to deliver the public register.”

Meanwhile, according to City AM, the London business daily, the plan is already receiving criticism from some who campaign in favour of greater rights for shareholders.  It quotes Peter Parry, director of the UK Shareholders’ Association (UKSA), as saying it was  “madness for the government to be asking the Investment Association to be overseeing the register,” arguing that it is not the body best-suited to the role, given its recent criticism by the Financial Conduct Authority.

The UKSA’s chairman, John Hunter, tweeted that the IA’s role in overseeing executive pay was comparable “to a fox being charged with overseeing a chicken coop”, the City AM article added.

ABOUT THE AUTHOR
Helen Burggraf
Helen Burggraf is the editor of International Investment. A US-trained journalist, she has worked in Rome, New York City and London, covering everything from the fashion and retailing industries to the global drinking water and water-treatment sector, private equity, and most recently, the international cross-border financial services/advice industry.

Read more from Helen Burggraf

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