Top City investors back ‘competitive’ FTSE pay amid London stock market fears | Business News

October 8, 2024 WOL

Investors managing more than £9trn in assets have backed a more “competitive” approach to British boardroom pay amid a growing debate about London’s attractiveness as a listing destination.

Sky News has learnt that the Investment Association (IA), the influential industry trade body, will publish on Wednesday a revised set of remuneration principles aimed at the UK’s biggest listed companies.

The updated guidelines comprise a simplified template for boards of businesses which have historically complained about a lack of clarity over investors’ expectations for executive pay packages.

City sources said the IA had sought, following feedback from members, to adopt a more pragmatic approach to an issue which has frequently become a flashpoint in relations between boards and shareholders.

The IA’s revised principles will continue to stress the importance of long-term value creation in remuneration policies, with pay levels explicitly linked to company performance.

It will also stress the need to “support individual and company performance within the context of sustainable long-term financial health of the business and sound risk management,” according to a person familiar with the updated principles.

Crucially, the IA will emphasise that there should be “flexibility” in companies’ approach to executive and that its members “want a competitive UK listing environment that attracts high-quality companies to list and operate in the UK, while delivering long-term value for their shareholders”, the source added.

The publication of revised guidance by the IA comes eight months after it wrote to the remuneration committee chairs of FTSE-350 companies to acknowledge that the gulf in pay with US peers was making it harder for London-listed companies to compete.

In recent months, a string of companies led by the Paddy Power-owner Flutter Entertainment have announced plans to move their primary listings from London to New York.

The City has also missed out on a series of prestigious initial public offerings (IPOs), with chip designer ARM Holdings opting to float in the US and private equity firm CVC Capital Partners listing in Amsterdam.

Executives at London Stock Exchange Group deny that they are concerned about the prospects of the UK public markets, although the debate has spurred the Treasury and Financial Conduct Authority to modify the UK listing rules to make London a more compelling prospect.

One acid test for the UK will arrive in the coming months when Shein, the Chinese-founded online fashion group, decides whether to pull the trigger on one of the City’s biggest-ever IPOs.

One chair of a FTSE-100 company said on Tuesday evening that he welcomed the IA’s revised guidelines, and that it would make future pay discussions “more focused on the fundamentals of our business and its performance”.

Data from this year’s annual meeting season suggests that relations between companies and their investors have already started to improve, with the number of pay resolutions hit by substantial opposition halving compared to 2023.

Companies including Compass Group and LSEG are among those which have sought or are seeking shareholders’ consent to hike their bosses’ pay packages.

The IA declined to comment further on Tuesday evening.

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