Directors’ remuneration—institutional investor guidelines
Directors’ remuneration—institutional investor guidelines

The following Corporate practice note provides comprehensive and up to date legal information covering:

  • Directors’ remuneration—institutional investor guidelines
  • Background
  • UK Corporate Governance Code
  • Coronavirus (COVID-19) investor guidance
  • The Investment Association (IA)'s Principles of Remuneration
  • IA position on executive director pension provision
  • GC100 and Investor Group guidance
  • PLSA Stewardship and Voting Guidelines
  • Joint Remuneration Principles
  • ISS
  • More...

Directors’ remuneration—institutional investor guidelines

Background

The remuneration of quoted company executive directors is subject to greater shareholder, media and political scrutiny than ever before.

In addition to the legislation and corporate governance regulation relating to executive remuneration, the main representative organisations of major institutional investors each produce their own guidelines on executive remuneration and make recommendations to their institutional shareholder members on voting strategy and other aspects of good stewardship.

In view of the significant influence of their members, quoted companies (via their remuneration committees) are expected to adhere to the key institutional investor guidelines, amongst them those of the Investment Association (IA) (formerly the Investment Management Association, which merged with the Investment Affairs division of the Association of British Insurers in June 2014), the Pensions and Lifetime Savings Association (PLSA), Institutional Shareholder Services (ISS), Glass Lewis, the Local Authority Pension Fund Forum (LAPFF) and Pensions & Investment Research Consultants Ltd (PIRC).

Much of the focus of the debate relating to executive remuneration is concentrated in the following areas:

  1. the upward ratcheting of directors’ remuneration and the role of share options and other incentive plans in aligning the interests of directors with shareholders

  2. the appropriateness of performance measures linking directors’ remuneration with performance

  3. the role of the remuneration committee in the setting of directors’ remuneration

  4. the issue of 'reward for failure', particularly in the area of severance payments for

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