James Sullivan-Tailyour of Pinsent Masons said remuneration committees should not be looking to protect executives’ pay at the same time as they are laying off staff or cutting salaries.
“Investors are also unlikely to be sympathetic if companies come to them later in the year for fresh capital, or if the dividend is cut, while executives continue to make substantial sums in share awards and bonuses,” he warned.
His comments came after The Investment Association (IA), which represents institutional investors, issued guidance on how it expects listed companies to respond to the pandemic.
The IA said there was a risk of “significant reputational ramifications” if directors’ pay was out of step in businesses which had engaged in redundancy programmes, made use of taxpayer-funded support schemes, sought to raise additional capital from shareholders or cancelled dividends.
Pinsent Masons legal director Fleur Benns also said that while the guidance was aimed at companies listed on the main market, the main principles would be equally relevant to those listed on AIM and larger private companies.
She said: “it is clear that companies that have suspended or cancelled dividend payments or relied on government support as part of their Covid-19 response will need to ensure that this is reflected in their executive remuneration.”
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