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Executive pay system ‘broken’ says Church of England Pensions Board

15 December 2022

Boards must listen to investors on excessive pay

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“THE system in which investors vote on executive pay is broken,” the chief responsible investment officer at the Church of England Pensions Board, Adam Matthews, has said.

“When shareholders vote against excessive pay, boards often disregard investor concerns. Votes on Remuneration Reports are advisory, and companies often simply seek more engagement, but we know little will fundamentally change.”

On Wednesday, the Pensions Board hosted investors, regulators, FTSE 100 remuneration committee chairs, and other interested stakeholders to review the current state of executive corporate pay before the 2023 AGM season.

“I think investors know the current system not only enables, but protects, excess, and there is a pretence of accountability,” Mr Matthews said. “With many workers facing a cost-of-living crisis, it is time to hold chairs of Remuneration Committees accountable.

“We also need to consider a review of the shareholder rights we do have, and whether investors need a binding, rather than advisory, vote on the outcomes of pay policies.”

Speakers at the Summit included Mr Matthews; Deborah Gilshan from The 100% Club; Simon French, Head of Research and Chief Economist at Panmure Gordon; and speakers from Norges Bank Investment Management (NBIM), Railpen, California State Teachers’ Retirement System, Australian Council of Superannuation Investors, National Employment Savings Trust (NEST), Legal & General Investment Management, Trades Union Congress, Financial Reporting Council, Morningstar, and the High Pay Centre, among others.

The Summit explored the challenges of executive pay from the perspectives of various stakeholders. Speakers discussed potential means of alleviating the tensions to stakeholder relations that executive pay causes, and which are being heightened against the backdrop of a cost-of-living crisis and economic challenges.

Last month, the Prime Minister called on “all executives to embrace pay restraint at a time like this”, and said that executives should “make sure that they are looking after all of their workers”.

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