Call for restraint on bonuses

Published on Friday 13 November 2009 20:51

ONE of the country's largest shareholder groups yesterday called on the chairmen of the UK's top firms to act with "restraint" as the annual round of bonus payments looms.

The National Association of Pension Funds (NAPF) – which represents 1,200 pension schemes controlling assets of about 800 billion – has written to the heads of the UK's 350 biggest firms to reinforce their demands on executive rewards.

In the letter, the NAPF called for a review of accepted best practice remuneration policies, which it said failed to serve management and shareholders well.

The NAPF said: "The objective should be to create simpler structures that better align interests over the long term and that expose management to significant financial risk in the event of failure to achieve agreed goals."

The organisation welcomed increased share ownership by management as a way of ensuring executives have financial stakes in firms

and it called for an increase in the practice of paying deferred bonuses in shares rather than cash.

There was a "continued need for restraint" on executive pay, the NAPF said, warning that it would maintain pressure over remuneration policies.

David Paterson, NAPF's head of corporate governance, said the group appreciated that companies had made efforts to constrain pay policies this year. But he stressed the importance of linking rewards to results and the long-term interests of shareholders.