Don’t use ‘boilerplate’ reasons to justify big executive pay rises, UK firms warned

The Investment Association (IA), representing firms managing £10 trillion in assets, has cautioned UK-listed companies against using generic justifications for large executive pay increases. In its annual letter, the IA urged remuneration committees to avoid relying solely on "benchmarking" against competitors to justify higher pay, warning it can create an unsustainable upward trend. The IA expects well-supported rationales for pay rises, demonstrating a strong link between pay and performance, especially as companies prepare annual reports for the spring shareholder meeting season. This comes amid a broader debate, with some City firms like the London Stock Exchange arguing for higher executive pay to remain competitive and attract top talent, exemplified by the London Stock Exchange Group CEO's recent pay increase. The IA's warning emphasizes the need for companies to prioritize shareholder interests and provide clear, substantiated reasons for executive compensation decisions.

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