The Association of British Insurers has issued strongly-worded new guidelines for listed company boards, warning them to avoid ratcheting up salaries and stop paying for failure.
The ABI, which represents life insurers and pension fund managers, said its members were worried about the growing levels of executive pay.
“Quantum of remuneration is a matter of concern to shareholders. Levels of pay that do not reflect corporate performance undermine the ability to reward success and represents excess rent extractions,” it says in the new guidance. “Shareholders are likely to object to levels of pay that do not respect the core principles of paying no more than is necessary and a linkage to sustainable long-term value creation.”
Sean O’Hare, a PwC remuneration partner, said the rules called on boards to use more discretion to adjust pay based on performance.
“This makes particular sense given the current economic environment, as in some cases the formulaic outcomes of pay plans may no longer be appropriate,” he said.