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A Quieter Year On Pay Does Not Mean Lack Of Shareholder Concern

Posted on July 26, 2015 at 4:20 PM

Is Amber the new Blue ?

It is surprising that 40% of FTSE 100 companies received an amber IVIS report in 2015, given that they are working within the policies approved by shareholders last year, says Linklaters, the global law firm. 

Most remuneration reports were approved with a substantial majority, and only one report ( Intertek plc ) was rejected, it reveals in its snapshot of Board Pay In FTSE 100 Companies in 2015. Its research is based on data taken from remuneration reports, IVIS reports (governance reports produced by The Investment Association), as well as AGM results of FTSE 100 companies.

But it is worth noting that a quieter year for board pay has been in part because most companies got binding shareholder approval for their pay policy last year, so do not need to go back to their shareholders until 2017.

"Behind the scenes, we're seeing more discussion between companies and their shareholders and voting agencies about board pay....shareholders still have real concerns about the structure and level of pay. Key issues for companies for 2016 will be better disclosure of bonus targets, the terms of recruitment packages and buy outs and the exercise of pay policy discretions, for example to increase salary" says Gillian Chapman, Employment & Incentives Partner.

In fact, the reason 40% of companies received an 'amber' rating for their remuneration report was in most cases because of "inadequate disclosure of performance targets and/or increases in the remuneration package" says Linklaters.

While shareholders were prepared to allow companies some discretion within their pay policies, they will continue to monitor how those discretions are exercised, it says.

But, interestingly it warns that the amber tops’ very prevalence may be their undoing.

"As they become more common, and even the norm, companies may well become more comfortable with such a rating" says Linklaters.

Meanwhile, I hope you are following the now well-established Sunday tradition of a #CorpGov cartoon on Twitter  - with participants and fans across the world.

Today's featured the excellent Dilbert - and I hope you can access it here

Categories: Scrutiny, Pay, Shareholders

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