The trade association has penned an open letter, addressed to remuneration committee chairmen, in which it has published its 2018 Principles for Remuneration which outline best practice for listed companies when setting executive pay.
It said in 2018 IA members will focus on: transparency in both financial and non-financial bonus targets; disclosure of pay ratios between CEO and other employees; clarity on aligning pay incentives with the company’s long-term strategy; and reducing future variable pay (such as bonuses) to limit overall pay.
The principles have existed for more than 40 years and are revised annually to reflect current best practice for listed companies.
This year, two requirements have been added. The first is that any relocation benefits should be disclosed at the time of appointment and only be paid for a limited period. The second is annual bonus targets should be disclosed within 12 months of payment and a portion of any bonus should be deferred if the bonus is greater than 100% of salary.
Andrew Ninian, director of stewardship and corporate governance at the IA said: “This year’s AGM season saw investors flex their muscles and hold big business to account.
“A majority of FTSE 350 companies sought shareholder approval for their new pay policies and many of the UK’s top 20 companies have started to address investors’ concerns on executive pay levels.
“We now expect this trend to be extended across the wider FTSE, with more companies showing restraint on bonuses, long-term incentives and overall executive pay levels.”
