UK pay policies should be stronger, says pensions body

The government’s new plans to force listed UK companies to disclose the pay gap between bosses and ordinary workers do not go far enough, according to the body representing the country’s pension funds.

Business secretary Greg Clark is expected to unveil a package of reforms later today that will include the pay ratio measures.

The announcement comes amid pressure on UK companies over executive pay packets — which are now generally 128 times higher than average staff pay, according to the Pensions and Lifetimes Savings Association — that are awarded even when they do not seem justified by company performance.

Some 86% of the PLSA’s members think executive pay at listed companies is too high, according to its statement today.

Luke Hildyard, stewardship and corporate governance policy lead at the PLSA, said: “We are hopeful that today’s announcement is a concrete step forward that will see a more measured and transparent approach to executive pay.”

But he added that the association, which represents 1,300 pension schemes with £1tn in assets, would like to have seen “stronger requirements”. Hildyard reiterated the PLSA’s previous calls to require a supermajority of 75% of shareholders to approve executive pay packets at companies’ annual general meetings. Under reforms introduced in 2013, listed UK firms must hold an annual advisory vote on the previous year’s salary and bonus packages for executives, and a binding vote every three years on the company’s pay policy going forward.

Mike Fox, head of sustainable investments at Royal London Asset Management, also welcomed the government’s plans, but said any new measures needed to “add value”.

RLAM manages £106bn across a range of asset classes, including more than £20bn in UK listed equities

“The current system does seems to be working,” said Fox. “Shareholders have become more proactive, the vast majority of companies have responded appropriately and this is the key reason why chief executive pay has fallen by almost 20% this year.”

A survey by FIT Remuneration Consultants published earlier this month showed bosses at FTSE 100 companies suffered a cut in take-home pay, which fell by 18% in 2016. However, this trend may have run its course. Despite some high-profile shareholder rebellions during this year’s AGM season, support for FTSE 100 executives’ pay actually rose slightly — from an average 90.6% vote last year to 93.1% in 2017.

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