The ABI today published its updated guidelines on executive remuneration.  This year’s review focuses on the role of Remuneration Committees in ensuring that the premium commanded by executives is consistent with the principles of pay for performance and that they are not paid more than is necessary.

Peter Montagnon, ABI Director of Investment Affairs, commented:

“While a shift towards more variable pay is healthy, shareholders are concerned that this masks a ratchet upwards in reward.  This could have detrimental consequences if the premium commanded by executives rises too far above general levels of pay in the economy or if the market and business performance turned down”.

The revised ABI guidelines make it clear that shareholders would like to see Remuneration Committees retain the discretion to modify awards downwards if the company’s actual performance means that the indicated award is not merited.  Shareholders are also concerned that share incentive awards vesting for median performance should not be large in relation to salary.

Revisions also address the forthcoming changes to pensions taxation, with the introduction of new language urging companies to disclose contingent liabilities and the extent to which future liabilities are unfunded.  Guidelines also advise that companies should consider how to limit future liabilities and consider alternative ways of delivering remuneration.

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Notes

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