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London-listed companies will have greater flexibility to pay higher salaries to senior executives under new guidelines from the UK’s £9.1tn investment body, despite a series of shareholder protests against the extraordinary pay packages .
He Investment AssociationThe trade body representing 250 large investors who own significant stakes in UK-listed companies, said on Wednesday it had “simplified” its remuneration guidelines so that companies could set pay policies that “tailor their specific needs.” ” and at the same time “respond to the needs of shareholders.” expectations”.
The move comes after prominent business figures called for higher salaries for executives to encourage companies to remain listed on the London Stock Exchange following a Exodus of groups that move to the US.where executive compensation tends to be higher.
AI director Andrew Ninian said the revised guidelines “demonstrate that investors want to incentivize long-term results.”
The investment body said its members wanted a “competitive” listing environment “that attracts companies to list and operate in the UK” and noted that “over the past year, there has been significant debate” about investor remuneration. executives and “their impact on the UK”. listed companies”.
Company compensation committees use AI guidelines when deciding whether to raise executive pay. Companies can deviate from the guidelines, but shareholders generally expect the reasons to be explained.
Julia Hoggett, chief executive of the London Stock Exchange, said last year that UK executives you have to pay more if the country wanted to retain talent and prevent companies from moving abroad.
The AI had committed last year to review its guidance after pressure to respond to concerns that it was too rigid and made it difficult for companies with an international presence to attract top executives, particularly from the United States.
Keith Barr, former head of InterContinental Hotels Group, is among a handful of executives who left the UK to emigrate to the United States. He warned that the UK was “not a very attractive place” for listed companies.
But the move to reward executives with higher salaries risks provoking further backlash from some shareholders, after major investors rebelled against pay increases this year. AstraZeneca investors approved a potential £1.8m raise for boss Pascal Soriot in April, but the company has been hit by a major shareholder revolt.
London Stock Exchange Group and Smith & Nephew were among the other FTSE 100 companies to push for higher executive pay deals at their AGMs this year.
The updated guidelines allow companies to compare executive compensation with that of international rivals, and note that if a significant proportion of revenue is generated in a foreign market, such as the US, the remuneration committee is encouraged to establish the impact of attracting global talent on remuneration positioning.”
Luke Hildyard, director of the High Pay Centre, a think tank, said executive pay practices at global peers were “relevant in some cases” but noted that “few UK companies have the size or footprint global similar to that of the largest companies in the United States.” , so comparisons are mostly redundant.”
Remuneration consultants Alvarez & Marsal said the change was “positive” and “may help the market develop a more rational and less emotionally charged framework for discussing pay levels.”
The new guidance also makes it easier for companies to adopt “hybrid” pay structures, which include long-term incentives that reward loyalty, but which have until now been more common in the US than the UK. Companies will also have more flexibility over the level of directors’ bonuses that must be deferred.
The IA said boards should exercise discretion to “avoid rewarding or penalizing executives for factors outside their control or influence.” Alvarez & Marsal said this more flexible approach was “a significant change in tone by AI.”