UK's top shareholders to propose executive pay shake-up

Jake Cordell
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Sir Martin Sorrell suffered a bloody nose at WPP's AGM this season as one-third of investors voted against his £70m pay deal
Sir Martin Sorrell suffered a bloody nose at WPP's AGM this season as one-third of investors voted against his £70m pay deal (Source: Getty)

Some of the UK's largest shareholders and senior directors at FTSE firms will this week demand a radical re-think in the way chief executives and top company earners are paid.

In a report to be published on Tuesday, leading UK corporate figures including the CEO of Legal and General, Nigel Wilson, and the chair of the Investment Association, Helena Morrissey, are expected to argue the current method of pay-setting is flawed, and propose overhauling the dominance of the long-term incentive plans (LTIPs) in determining top pay packets and bonuses.

The report comes after another AGM season of high-profile rebellions at what shareholders deemed excessive levels of pay in company boardrooms. It is also particularly timely given prime minister Theresa May's promise to reform corporate governance. In her short time in office she has already signalled plans to force companies to publish pay ratios, put employee representatives in the boardroom and pay closer scrutiny to foreign takeovers.

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In an interim report in April, the group, which also includes Sainsbury's chairman David Tyler and Russell King the remuneration committee chairman at Aggreko and Spectris as representatives from listed firms, advocated full disclosure of bonus targets and demanded more flexibility and intuition was brought into the setting of pay for top executives. The group said too often "one-size fits all, formulaic" pay structures had led to "remuneration creep" and inflated pay packets which were "not especially closely-aligned to shareholder interests".

Rumours earlier this month suggested the group may call for shareholders to be given a binding vote on pay, in a bid to preempt a similar move from May's new government.

A poll by FTI Consulting showed last week 81 per cent of business leaders from small, medium and large companies backed a tougher government stance on how the UK's largest companies are run.

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