Fund managers react to government’s green paper proposal

Fund managers react to government’s green paper proposal

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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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