The UK’s Investment Association (IA) has urged FTSE 350 public companies to publish chief executive pay and compare it with average employee earnings.
The IA, which represents £5.7tn in funds, wrote an open letter to remuneration committee chairmen, warning that the current political and economic climate meant that pay would receive a lot of attention at next year’s AGMs.
The letter states that the IA has now rewritten its own Principles of Remuneration, in line with the Executive Remuneration Working Group’s recommendations to pave the way for simpler and more flexible remuneration structures.
The association called on companies to publish the ratio of chief executive pay to that of the median employee, and also between the chief executive and the executive team, to help shareholders judge for themselves whether the payments were fair.
It also asked companies to explain properly why the amount paid to the chief executive was justified each year instead of referring to pay schemes set down beforehand.
Andrew Ninian, director of corporate governance & engagement, said that the new Principles “are designed to offer a market-based solution to add simplicity and flexibility. It is vital that companies have the opportunity to choose the right structure for their business and this must be done in close partnership with their shareholders.”