4 March 2022
The Investment Association has published its “Shareholder priorities and IVIS approach” for 2022. Both this document and the recently released PLSA’s updated “Stewardship and Voting Guidelines” place emphasis on some key themes, including:
- Climate change
- Diversity and Inclusion
- Stakeholder engagement
Whilst the topics may not come as any surprise, there is some interesting commentary in both documents which may be of interest to companies and their stakeholders.
The PLSA states that the average shareholder dissent to remuneration resolutions in 2021 was double the average in previous years and notes that the highest levels of dissent now apply to remuneration resolutions. This indicates the level of scrutiny of executive pay in particular in the recent context of the Covid-19 pandemic and rising costs of living. The PLSA calls on companies to show restraint on executive remuneration, particularly in the case of companies who have claimed Government support during the pandemic.
This comes in the context of the PLSA describing remuneration as a “litmus test” for wider corporate governance practices, and noting that significant pay discrepancies between senior executives and the rest of the workforce can indicate wider issues with a workplace’s culture and process, in particular where there is any discrepancy based on gender or ethnicity.
The IA “Shareholder Priorities” document does not have specific content on remuneration, as this is covered in its Principles of Remuneration (updated in November 2021). However, it does reference the role of remuneration committees in engagement with stakeholders and welcomes the leadership shown in the pandemic response. It mentions in particular the sensitivity shown to wider shareholder and stakeholder experience by ensuring remuneration outcomes were linked to that wider experience and not just to the outcome based on performance metrics. The IA goes on to reference its letter to Remuneration Committee Chairs in November 2021, noting that this consideration of the experience of major stakeholders will continue to be a critical investor expectation in 2022, as the effects of the pandemic and its aftermath are felt.
In addition to the specific comments related to remuneration which are referred to above, companies and investors may find the wider commentary from both the PLSA and the IA helpful in outlining their views around the wider issues of ESG, including specifically around climate change and new reporting requirements, as well as on topics of gender and ethnic diversity. Where these factors are reflected in pay structures and/or performance metrics they may also be of direct relevance for consideration of remuneration and reward throughout the organisation.
If you have any questions on the above, please do get in touch.