Firms warned of ‘shareholder spring II’

PENSION funds have warned the UK’s biggest company bosses to expect another shareholder spring unless they clamp down on “unjustified” executive pay.

The National Association of Pension Funds (NAPF), whose members manage asset of around £900 billion, have called for caps on remuneration in line with inflation and have argued that executive pay should be kept in line with the rest of the workforce – “or have a good explanation ready”.

In a letter sent to the chairmen of all FTSE 100 and 250 indexed companies, NAPF urged remuneration committees to “take a firmer line” when 
finalising bonus payments and share awards and to ensure that “rewards are aligned with the success of the business”. NAPF also criticised the use of “peer group benchmarking”, which it blames in part for the escalation of boardroom pay. Instead companies should “focus more on their own strategies and less on comparing themselves against their peers”.

Last year shareholder revolts led to the resignations of Aviva chief executive Andrew Moss and Trinity Mirror boss Sly 
Bailey.

The warning comes ahead of the start of the NAPF Investment Conference in Edinburgh on Wednesday.

Joanne Segars, chief executive of NAPF, said: “Shareholders were very vocal last year, and those companies that have failed to take a robust stance on boardroom pay should expect similar opposition this spring. Too many companies have allowed the link between pay and long-term business performance to weaken in recent years.”