New move on excess pay
Aberdeen demands tighter rules on executive pay
Aberdeen Asset Management says company boards should receive the backing of at least 75% of shareholders on pay policies.
The proposal is contained in a submission to MPs on the Business, Energy and Industrial Strategy (BEIS) committee who are inquiring into corporate governance.
The asset manager’s move follows concern over huge pay deals expressed by a number of City heavyweights including Legal & General.
L&G has demanded Britain’s biggest companies publish more details on pay scales and says annual bonuses should be capped at two times salary.
Outrage has continued to dog big companies which have defied public objections to huge bonuses and salaries. Bob Dudley CEO at BP and Sir Martin Sorrell, head of advertising giant WPP, were among those to have been victims of major shareholder revolts over pay this year.
Under rules that came into force in 2013, companies must hold legally binding votes on future pay policies every three years – or sooner if businesses want to alter compensation plans. These votes require the backing of more than 50% of shareholders.
However, the annual votes that firms hold on the pay packets received by bosses in the previous year are still non-binding.
Prime Minister Theresa May, said in her acceptance speech in July that she wanted to tackle the issue as part of her equality and fairness agenda.
She indicated that these annual votes may become binding.
Aberdeen, led by Martin Gilbert (pictured), wants to go further, reports the Sunday Telegraph, and give shareholders more power by requiring tighter rules and greater communication from the boardroom.
It said: “This approach would lead to an active dialogue over the year, such that the vote gained the necessary support,
“A failure to achieve the threshold would likely have consequences for those directors who were party to the discussions between the company and its shareholders.”
The asset manager believes the pay revolts earlier this year were having the desired effect of changing attitudes towards pay.
“We believe the votes have also had a chastening effect across other companies, leading some to greater circumspection in decision-making by remuneration committees,” the company said.