by Cliff Weight, Director, ShareSoc.
On 22 November 2018, the Investment Association (“IA”), wrote to the chairmen of the remuneration committees of FTSE 350 companies attaching its updated Principles of Remuneration . These changes to the IA guidelines have been made against the backdrop of the new remuneration provisions in the UK Corporate Governance Code and the changes to the reporting of directors’ remuneration which is due to come into force for accounting periods beginning on or after 1 January 2019.
MM&K’s excellent(*) review of The Investment Association’s new principles of remuneration for 2019 is below. It appears that many of these principles are aimed at reducing the risk of “excessive” pay or increasing the justifiability of pay. They add greatly to the complexity of the task for FTSE 350 Remuneration Committees, who will need intelligent, independent and diligent remuneration consultants to keep them compliant. This will also increase the work (and profits) of Proxy Agents, including the IA subsidiary IVIS. Jobs for the boys?
Small Cap and Aim companies should not blindly follow the IA guidance. They should consider using share options as the core part of the incentive and think carefully what is right for them, particularly if they are growing fast or need new incentives following a loss of shareholder value. ShareSoc’s remuneration guidelines for Smaller Companies are more useful than these new IA Guidelines. Click here to download your copy ShareSoc-Remuneration-Guidelines Smaller Companies 2018.07.06
(*) I am a director of MM&K, so may be biased. Readers can judge for themselves!