Fund managers are urging the UK’s top bosses to rein in their pay this year as the economy is rocked by a cost of living crunch.
In a letter to senior leaders at FTSE 100 firms, the Investment Association, which represents the investment industry, said that pay-packets of executives should be “kept in check” in the period ahead as household struggle with soaring costs.
“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,” said Andrew Ninian, Director for Stewardship and Corporate Governance at the IA.
“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 to promote the long-term success of the business.”
The investor body has set out new ‘Principle of Remuneration’ guidelines which it says outlines what investors will be looking from firms ahead of the 2023 AGM season.
The calls come after FTSE 100 chief’s pay was revealed to have surged by nearly a quarter this year on the back of a bonus bonanza.
Chief executive pay at the UK’s biggest firms rose 23 per cent on average to £3.9m after record bonus payouts, as bosses sailed past low-ball performance targets set during the pandemic, according to research from Big Four firm PwC.
PwC’s executive compensation lead Andrew Page said that the bumper payouts are likely to be met with “greater investor scrutiny, particularly in the context of rising inflation and pay increases across the workforce.”
In its letter today, the Investment Association echoed the warnings and said “company boards will need to carefully navigate this period of significantly higher inflation and economic uncertainty” when coming to a decision on executive pay.
“Investors want to see boards balance the need to incentivise executive performance and reward those who out-performed during the difficult market conditions, while ensuring that executive experience is commensurate with that of key stakeholders including shareholders, and those most impacted by the cost-of-living crisis, such as lower paid employees, vulnerable customers, and suppliers,” the body said.