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Remuneration guidelines of the Investment Association

The remuneration guidelines of the Investment Association are central to the design of pay and incentive packages which are likely to be acceptable to investors. This includes their recommendations for the design of employee share schemes.

The Remuneration Committees of companies and their advisers need to pay heed to developments and updates from the IA. On 16th November, the IA wrote to FTSE 350 Companies – see Remuneration Principles Update – making a number of recommendations:

1. Remuneration Committees should be careful not to isolate executives from the impact of Covid 19 in a manner which is inconsistent with the approach taken for the general workforce and should also be cognisant of the pandemic on society.

2. Increased focus on non-financial performance metrics including ESG (Environmental, Social and Governance).

3. Ensuring shareholders understand the mechanisms in place to ensure that post employment shareholding policies are in place once a director has left the Company.

4. A proportion of any bonus should be deferred when the amount of the bonus exceeds 100% of salary.

5. New executive directors or a director whose role is changing should benefit from pension contributions aligned with the majority of the workforce.

6. For existing directors, there should be a credible action plan to align pension contributions with the rest of the workforce by the end of 2022.

If you wish to discuss any aspect of these recommendation, please get in touch.