Fund management trade body the Investment Association has reportedly written to the chairs of FTSE 350 remuneration committees signalling a change in its position on bosses’ pay packages.
The news comes as some City grandees argue higher pay would attract more top talent to London and help reverse a recent dearth of dealmaking and capital markets activity.
Sky News reported on Tuesday that a draft of the IA’s letter said it plans to carry out a “fundamental review” of its “Principles of Remuneration” later this year in light of “the evolving member expectations on remuneration and feedback from companies”.
The group, which has previously tried to hold firms to account over perceived excesses in boardroom pay, noted feedback from FTSE 100 companies that it was increasingly difficult to “attract US executives and compete in the US market” because of the difference in pay culture.
Asset managers in London have reportedly been considering approving US-style bonuses as incentives for bosses, with the draft letter said to highlight a desire for schemes involving a combination of restricted stock and long-term share awards.
It also flagged concerns from companies that measures to justify large pay packages to shareholders with thorough evidence of financial performance may have had a “disproportionate” impact on remuneration.
“We will ensure that current market practice and expectations of our members lead to the evolution of the Principles, rather than the Principles dictating market practice,” the draft letter said.
A spokesperson for the Investment Association told City A.M.: “We want to see a competitive listing environment that attracts companies to list in the UK. As such, we are currently consulting with our members on their current views on executive remuneration at investee companies, with an underlying principle that there is clear alignment between pay and performance, and to ensure that remuneration structures work for companies, executives, and shareholders. Once this consultation process has completed, we will look to publish our members’ views.”
Groups like the High Pay Centre have criticised FTSE bosses pay packages for being too large amid the cost-of-living crisis. It recently found FTSE 100 bosses earned more in the first three and a half days of 2024 than the average worker’s yearly salary.
“If the UK wants world leading companies in the FTSE 100, it needs to get over what CEOs are paid,” London Stock Exchange executive Neil Shah wrote on LinkedIn after the High Pay Centre’s report.
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