We’re pleased to announce that we have now published Tapestry’s FTSE 100 Review for 2020.
For a number of years, we have reviewed the Directors' Remuneration Reports of the FTSE 100 to identify key trends. For 2020 we have focussed on the following 4 areas:
- Environmental, Social and Governance (ESG) performance metrics
- Restricted Stock
- Post-employment holding periods
We have produced detailed reports of our findings for each of these four topics, including a company-by-company analysis, together with an Executive Summary containing some of our key findings and commentary.
Some of the questions we have sought to answer in our review:
- How many companies are incorporating ESG metrics within their general scorecards, and how many are giving ESG metrics a separate weighting? Which metrics are most often used, and within which type of plan, and are trends emerging across different sectors?
- How common is committee discretion and in what circumstances can it be exercised? Which companies disclose having both an upwards and downwards discretion?
- Which companies are operating Restricted Stock plans, and how have those plans been received by shareholders? What is the most common level of discount, and how are underpins being structured?
- Are most companies now implementing post-employment holding periods in line with the Investment Association's (IA) guidance, and what level of shareholding is typically required? Are companies implementing structures to enforce the holding?
The 2020 Tapestry FTSE 100 review has uncovered a number of interesting trends across the four focus areas and provides a detailed benchmark of the approach taken towards these topics by the FTSE 100 companies.
ESG - The increasing importance of ESG metrics is evident from the review - a large majority of FTSE 100 companies now incorporate ESG metrics into their executive remuneration, with a significant number incorporating metrics from all 3 of the ESG limbs. The speed of change is being accelerated by the shifting regulatory landscape surrounding ESG metrics, such as gender pay gap reporting and enhanced climate disclosures, and also the mounting body of evidence suggesting that a strong and well-thought-out ESG approach will correlate with a higher-performing and more robust business.
Discretionary Powers - Discretion is emerging as an important tool in the COVID trading environment, as companies try to reconcile the uncertain landscape with the need to ensure that incentivisation outcomes are fair and reasonable. Our report demonstrates that including either a general or targeted discretionary power is now seen as a must-have for businesses.
Post-Employment Shareholding - Our review demonstrates that a majority of companies have taken significant steps to adhere to the post-employment shareholding recommendations put forward by the IA and the Corporate Governance Code, with many replicating the exact specifications of the IA's recommendations. The methods of enforcing these shareholdings are less well evidenced in the remuneration reports, but we are seeing clients making changes to their grant documentation and shareholding policies to ensure that their post-employment shareholding requirement can be enforced.
Restricted Stock - The recommendations from the Purposeful Company’s report on Restricted Stock are gaining traction, with 10% of FTSE 100 companies now operating a restricted stock plan. It will be interesting to see whether the current climate will act as an additional accelerant for more companies to make this switch. As COVID means many traditional inflight LTIP structures are now underwater and setting detailed performance targets for new awards is a challenge.
Our report highlights those companies with the highest and lowest shareholder approval ratings and suggests there may be investor resistance to restricted stock plans implemented with an insufficient discount level.
If you would like an electronic copy of our detailed reports, please do contact us.
Carla Walsham and Sarah Bruce