The UK’s pension fund trade body has added its voice to those calling for a tougher stance on executive pay.
The Pensions and Lifetime Savings Association (PLSA) wants investors to oppose the re-election of remuneration committee chairs if they also reject pay packages.
The recommendation is part of an updated PLSA corporate governance policy and voting guidelines, aimed at encouraging pension fund investors to be more active when voting on remuneration issues.
Luke Hildyard, the PLSA’s policy lead for stewardship and corporate governance, said: “Provocative levels of executive pay are doing great damage to the reputation of British business. The failure of some companies to recognise stakeholder concerns on this issue is a major worry for pension funds as investors.
“Our new guidelines are designed to ensure the individuals responsible for a company’s executive pay practices are held to account. We hope this can at last deliver meaningful progress on excessive top pay.”
The PLSA’s corporate governance code states: “Remuneration committees should take ownership of, and be accountable for, both the remuneration policy and its outcomes. Companies should consider how they might align pay more closely with the interests of their long-term owners to position themselves best for future success.”
The trade body’s comments come after BlackRock, the world’s largest asset manager, wrote to the chairs of the 350 biggest listed companies in the UK last week.
The asset manager said executive pay increases should not exceed those granted to the rest of its workforce.
The letter, quoted in the Financial Times, said: “In the case of a significant pay increase that is out of line with the rest of the workforce, BlackRock expects the company to provide a strong supporting rationale.”
The PLSA’s guidelines also include a recommendation to vote against a company’s report and accounts if there is no statement regarding diversity policy.