UK - The Association of British Insurers (ABI) has revised its guidelines on executive remuneration to include "a key role" for non-executive directors in determining remuneration and active involvement of shareholders in pay decisions "without micromanaging".
According to the revised guidelines, company boards should support appropriate reward for exceptional performance, strongly resist payment of failure and avoid crude benchmarking when seeking to justify increases.
In a statement, the ABI said: "Excessive or undeserved remuneration undermines the efficient operation of the company, adversely affects its reputation and is not aligned with shareholder interests."
In its first report on board effectiveness, scheduled for publication today, but not available at press time, the ABI focuses on women in the boardroom, succession planning and board evaluation - three indicators it claims are crucial to board effectiveness.
Campaigners and investors largely welcomed the revised guidelines.
The Department for Business said: "The key principles in the ABI's guidance match what we have found in our conversations with shareholders, investors and business leaders so far - that excellent performance should be rewarded, but that there is a strong need to end 'reward for failure'."
A spokesman from the shareholder activist Church Commissioners' ethical investment advisory group said there were "no signs of companies themselves moderating executive remuneration".
It added: "It is essential that investors use their voice to prevent excess."
The Commissioners, who oversee the Church of England's pension scheme and other investments totalling £5.3bn (€6bn), this spring announced they would not support executive remuneration above three times basic salary.
Louise Rouse, director of engagement at campaigning group FairPensions, said she welcomed further pressure on shareholders to address the pay issue.
Asked whether she thought investors were becoming more inclined to challenge boards, she pointed to recent figures from the High Pay Commission, a quango, pointing to bonuses being up 187% as share prices fell by 71%.
"Given that most remuneration packages pass with the support of shareholders, it's clear they haven't curbed excessive remuneration," Rouse told IPE.
ABI's revised guidelines are the latest in a series of efforts from ministers and investor groups encouraging shareholders to exercise their governance duties.
Suggestions to date include compulsory voting disclosure, the introduction of forward-looking remuneration reports and more frequent votes on executive pay.
"The first step," said Rouse, "is to empower shareholders to act on executive remuneration - but after that, you need to make sure they rise to the challenge and do it."
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