Companies that saw more than 20 percent of investors voting
against pay packages for board members will be named and shamed
in a new corporate governance public register in the U.K.
Britains Department for Business, Energy and
Industrial Strategy announced the register on Tuesday along
with other plans for new laws that the government is hoping
will increase public trust in big business. It will be policed
by the Investment Association, a British trade group which
represents the interests of asset managers.
The announcement proved timely for investors. A day earlier,
the Pensions and Lifetime Savings Association released the
results of a survey that found 84 percent of pension funds are
concerned about the pay gap between staff working at the coal
face and those in the boardroom. The survey of 53 pension
funds, representing £800 million ($1.035 billion) in
assets, also showed that 86 percent of pension funds believe
executive pay at public companies is too high.
This public register will help sharpen the focus on
the those who must do more, enabling our members to hold the
countrys biggest businesses to account and leading to
better-run companies, Chris Cummings, chief executive of
the Investment Association, said in a statement. We look
forward to working with government to deliver the public
register and aim to launch it later this autumn.
Executive pay has been a top issue for pension funds and
asset managers in governance reports in recent years. Between
January and July, six FTSE 350 companies withdrew their pay
proposals because of pressure from asset management firms.
[II Deep Dive: Fund Firms Turn Up the Heat on Executive Pay
and Its Working]
One of the most vocal investment houses in the U.K. has been
Royal London Asset Management, which manages £106 billion
in assets, including £20 billion in listed equities.
Mike Fox, head of sustainable investments at RLAM, welcomes
the U.K. government announcement, but warns that any new
measures need to go beyond what the fund management industry
has already achieved.
The current system does seem to be working:
shareholders have become more proactive, the vast majority of
companies have responded appropriately and chief executive pay
has fallen by almost 20 percent this year, he said in a
The U.K. government plans to force listed companies to
reveal the pay ratio between bosses and workers, which means
about 900 companies will have to report the figure annually,
according to its announcement Tuesday.
RLAMs Fox said the ratios could prove misleading.
We dont think that forcing listed companies to
reveal the pay ratio between bosses and workers will be
meaningful, he said. It will show large
discrepancies between sectors depending on the nature of the
workforce and the results could easily be