London-Listed Companies Given More Freedom to Boost Top Executives Wages
The move follows a review aimed at ensuring that the U.K. markets continue to attract high-quality companies.
London-listed companies will be given more freedom to boost wages of their top executives, after a large investor body changed its guidance for remuneration committees.
The Investment Association (IA), which represents 250 large investors with stakes in businesses listed in the U.K., said Wednesday that it had simplified its principles of remuneration, following a review aimed at ensuring that the U.K. markets continue to attract high-quality companies.
The move comes after David Schwimmer, the chief executive of the London Stock Exchange Group LSEG -0.29%decrease; red down pointing triangle, warned last month that London’s prestige as a top financial center was at risk if executives’ wages weren’t increased.
Andrew Ninian, director of stewardship, risk and task at the IA, said that the association has simplified its principles of remuneration “to demonstrate that investors want to incentivize delivery of long-term performance.”
“Investors want to see companies succeed and deliver long-term returns to their shareholders, with the structure of executive pay playing an important role in driving and rewarding these results,” he added.
The chief executives of the companies listed in the FTSE 100 index are being paid more than ever before, according to the High Pay Centre think tank, which estimates that they received an average 2.2% pay rise in 2023, boosting median annual pay to 4.19 million pounds ($5.5 million).
But the gap with their peers in U.S.-listed companies has widened. Chief executive pay at S&P 500 companies increased almost 13% in 2023 to an average of $16.3 million, according to data analyzed for The Associated Press by information services firm Equilar.
The IA’s updated principles, which are often followed by remuneration committees when setting executives’ pay, now allow for companies to benchmark their wages against competitors overseas, in a bid to help London-listed businesses struggling to poach chief executives being paid higher wages elsewhere.
Remuneration committees of companies “deriving significant revenues from particular markets such as the U.S.” or “competing for talent globally” would be “encouraged to set out the impact of attracting global talent on the positioning of remuneration,” the updated guidance document stated.
The IA, which represents investors responsible for 9.1 trillion pounds worth of assets, also backed the use of hybrid pay schemes—a combination of performance shares and restricted shares—recognizing that these are more commonly offered in companies with a significant footprint in the U.S. than those listed in Britain.