Investors urge fat cat bosses to keep pay in check

Leading institutional shareholders are urging fat cat bosses to keep their pay in check during the cost-of-living crisis.

The Investment Association (IA), which represents fund managers and other City investors with £10trillion of savings on their books, told London-listed companies to show ‘additional restraint’ when increasing the salaries of well-paid executives.

The warning shot comes just days after figures from PwC showed that FTSE 100 bosses have seen their average pay swell to £3.9million, while data from the Money and Pensions Service revealed one in four adults have less than £100 in savings.

Executive pay: The Investment Association told London-listed companies to show ‘additional restraint’ when increasing the salaries of well-paid executives

Andrew Ninian, director for stewardship and corporate governance at the IA, said: ‘With the cost-of-living crisis hitting UK households, investors want to see companies show restraint on executive pay and bonuses, ensuring that executive pay packets are balanced against the experiences of their wider workforce, customers, and other stakeholders.

‘While we know from our discussions with companies that many are targeting salary increases to lower-paid employees, it is imperative that all companies carefully consider how they award pay.’

The unusually blunt letter sets the scene for a bloody season of annual general meetings next year.

Shareholder rebellions were already picking up pace this year, as investors objected to remuneration packages at Marks & Spencer, Premier Inn owner Whitbread, and data and events business Informa.

Retaining and motivating all employees, not just executives, will be key for many businesses’ survival, the IA said.

The IA has also asked companies to scrutinise any ‘windfall gains’ top brass may pocket. Many bosses were granted long-term share awards in 2020 – when stock prices were low due to the pandemic.

With many share prices bouncing back, the awards could be worth huge amounts when bosses are able to access them in 2023, presenting them with ‘windfall gains’.

If a remuneration committee ‘has decided not to adjust for windfall gains, it should explain and disclose its rationale’, the IA said.

But some in the City are worried that the focus on executive remuneration – combined with the burden of regulatory compliance – is putting off the best candidates from running listed companies.

Instead they are going to run private equity-backed companies away from public markets, according to Mark Freebairn, head of the board practice at recruiter Odgers Berndtson.

‘If you’re a chief executive and a private equity firm comes along and gives you the chance to run a company and do the job you love for the same money but without any of the scrutiny, without the box-ticking, without your neighbours knowing everything about your pay – why wouldn’t you take it?’ he said.

This post first appeared on Dailymail.co.uk