THE FINANCIAL REPORTING COUNCIL’s proposed amendments to executive pay policy in the UK Corporate Governance Code have been backed by four leading institutional investors.
Hermes, USS, RPMI Railpen and the National Association of Pension Funds (NAPF) said the removal of the requirement for remuneration to “attract, retain and motivate” directors will help stem the “ratcheting up” of pay at the top of businesses.
The investors’ coalition, which published its own guidance on remuneration policies in November, said the FRC’s inclusion of the requirement to promote long-term success of the company through pay design “better reflects” the need for sustainable performance and “the behaviours and culture that support it”.
Newly-added clawback and malus measures will make it easier for remuneration committees to “take greater ownership of, and be more accountable for, pay outcomes”, rather than applying “simplistic, mechanistic formulae” in setting executive awards, the group added.
The FRC’s consultation on changes to the UK Corporate Governance Code runs until 27 June, with the guidance due to go live from 1 October 2014. FRC chief executive Stephen Haddrill said the proposed remuneration reforms “reflect the views of investors and others”.
Some of the more divisive elements of the watchdog’s going concern guidance are also under consultation as part of the code’s review.