Investment Association guidance on executive remuneration in UK listed companies: shareholder expectations during the COVID-19 pandemic

Of interest to those working in listed companies

On 27 April, the Investment Association (IA) published guidance outlining shareholder expectations on executive pay in light of COVID-19. As the IA states, ‘Shareholders recognise that Remuneration Committees will need to sensitively balance the need to continue to incentivise executive performance at a time where management teams are being asked to demonstrate significant leadership and resilience and ensure the executive experience is commensurate with that of shareholders, employees and other stakeholders.’

They will, however, ‘expect Remuneration Committees to take account of their individual circumstances particularly considering the impact on their stakeholders.’

Specific guidance is offered on:

  • Should a company that has suspended or cancelled a dividend in relation to FY2019 consider adjusting bonus outcomes for FY2019?
  • Would shareholders support performance conditions being adjusted to take account of COVID-19?
  • Where companies have already granted 2020 LTIPs (as is likely for December year-end companies), what do shareholders expect from Remuneration Committees to ensure that a windfall gain will not been received by executives?
  • Where companies expect to make LTIP grants in the coming months, what are shareholders expectations on long-term incentive grant sizes and performance conditions?
  • What are shareholders expectations if a company seeks additional capital from shareholders or takes money from the government such as furloughing employees?
  • Many companies will have their three-year Remuneration Policy up for a shareholder vote at the forthcoming AGM. How will shareholders consider proposals to change remuneration structures, including increases to variable pay opportunity?

The complete guidance can be found at: https://www.theia.org/sites/default/files/2020-04/Remuneration%20and%20COVID-19.pdf

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