Fund managers react to government’s green paper proposal
Pensions and investment management firms have welcomed the
proposals by the UK government to publish a green paper on executive pay.
Leon Kamhi, head of responsibility at Hermes Investment
arrangement, commented:
“The additional measures proposed today by the government
look set to strengthen investors’ hand on pay, and it is now incumbent on both
companies and us as investors to response to the challenge of excessive
executive remuneration.”
Corporate governance
reform, which will be delivered by business secretary Greg Clark to
parliament, asks whether shareholders should have the binding vote on executive
pay, how employees should receive “voice” in the boardrooms boardroom and
whether private companies should be subjected to some of the rules faced by
public companies.
“Our members are concerned by the rising levels of executive
pay and believe the justification for this increase is weak,” said Luke
Hildyard, policy lead for stewardship and corporate governance at Pensions and
Lifetime Savings Association (PLSA). “We are pleased that the government’s
green paper is expected to include proposals that we have previously advocated,
including the publication of intra-company pay ratios.”
The idea of the “CEO-to-median-employee pay ratio” is
supported by Hermes, as it pressurises the boards to explain the rationale
behind the level of executive remuneration and disparities in pay across the
organisation.
Kamhi stressed that the boards of both public and private
companies need to be ore “diverse” and “recognise the critical contribution
that employees make to the success of every company.” He would also like to see
the government go further and propose on boards.
“All companies, whether public or private, need to be working
on behalf of the beneficiaries who are invested in them,” Kamhi added.
PLSA is due to publish its AGM report on Thursday, which
will highlight how its pension fund members feel about current levels of
executive pay.
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