“It has become necessary to expand our guidelines in the light of new legislation providing for enhanced disclosure and giving shareholders a regular vote on remuneration at annual meetings, “ said Peter Montagnon, Head of Investment Affairs.

“There is no change in the basic principle that remuneration should be linked to performance but previously the guidelines focused on share incentive schemes as the only aspect of remuneration on which shareholders were specifically entitled to vote.

“ Now that there is to be a broader vote on remuneration, we have set out some reference points based on the new disclosures which companies are required to make. This will help our members with voting decisions and assist companies by showing them how shareholders are likely to react.”

The best practice statement on contracts and severance pay, which was published last week jointly with the NAPF, has been incorporated into the guidelines as well as two other new sections on basic principles and on the structure of pay packages. This section states that companies should justify any decision to grant base pay above the median for their sector and cautions that shareholders are likely to oppose cash bonuses paid for the completion of transactions such as acquisitions.

The existing guidelines on share-based incentive schemes are also incorporated with only minor modification reflecting market practice over the past year.

“Institutional shareholders recognise the importance of rewarding success, “said Mr Montagnon, “but they have a duty to individuals who save through them to exercise responsibility as shareholders. That responsibility must include making sure that boards manage remuneration fairly.”

A copy of the new guidelines is attached. They have been posted on the ABI website and will be circulated to major listed companies as well as to their advisers.  They can be accessed through the ABI website www.abi.org.uk.

Notes

Enquiries to:           

Leonie Edwards            020 7216 7411 (Mobile: 07712 841184)

Emma Grainge             020 7216 7392 (Mobile: 07712 841183)

Malcolm Tarling             020 7216 7410 (Mobile: 07776 147667)

The ABI is the trade association for Britain’s insurance industry. Its more than 400 member companies provide over 97% of the insurance business in the UK. We represent insurance companies to the Government, and to the regulatory and other agencies, and provide a wide range of services to our members. ABI member companies account for more than a fifth of investments in the London stock market.

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