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UK Church Investors Group warn on CEO pay

The Church Investors Group (CIG) has written to all FTSE 350 company secretaries outlining its revised voting policy for 2017 which includes a tough stance on executive pay. The CIG brings together the major church-based institutional investors and with their combined assets of approximately £ 17 billion aims to increase their impact through the joint voting policy.

REVD CANON EDWARD CARTER

Rev’d Canon Edward Carter

The Reverend Canon Edward Carter, Chair of the Church Investors Group, said: “As responsible investors, members of the Church Investors Group have long used their voting rights to promote the best standards of corporate governance at investee companies. Our members are committed to playing an active and productive role in advocating for improved governance at this important time of reform”.

The letter informs companies that they will be assessing then on whether their remuneration policies could result in excessive executive pay and whether the incentives are likely to encourage long-term returns for shareholders. The CIG said that it would vote against a remuneration policy if it breached any of four key principles: remuneration schemes should not breach accepted local-market good practice; short term incentive awards should not exceed 100% of base salary for ‘on target’ performance and/or 200% as a maximum award while companies should disclose ‘maximum’ and ‘target’ award levels; possible awards for short term performance should not exceed possible long-term awards and disclosed ‘Non-financial’ metrics should be incorporated into variable remuneration schemes

Stephen Beer, chief investment officer of the Central Finance Board of the Methodist Church, said: “Church investors have long sought to address excessive executive pay. Through the letter we have reminded companies of our concerns and asked for further information about how internal pay differentials are monitored and incorporated into executive pay policies.

The letter to companies also outlines the investors stance on gender diversity, climate change, and wider corporate governance best practice.

Adam Matthews, head of engagement for the Church Commissioners and Church of England Pensions Board, said: “This year promises to be an important year for issues of executive remuneration and climate change. Last year saw a number of high profile votes going against board recommendations and we expect this issue to continue to be high on shareholders agenda in the 2017 voting season. It is vital that companies exercise judgement when recommending executive remuneration packages to shareholders.

Last year saw strong opposition to high executive pay and with binding votes on pay policies taking place at the AGM of many companies this year it is being seen as an important test of how well companies are listening to investor concerns. This is set against a back drop of renewed political interest in corporate governance, with the government consulting on a green paper which contained a number of proposals on pay disclosure and giving more shareholder say on executive pay. At the same time the Business, Energy and Industrial Strategy select committee of MPs is holding an inquiry into corporate governance which is taking evidence around executive pay.

What do you think?