FTSE 100 Executive Pension Contributions Fall in Line under Pressure from Investors

Shareholder rebellions down, according to Investment Association data, but executive pay still under close scrutiny.

Shareholder pressure has forced leading UK companies to align executive pension contributions more closely with other employees, according to an analysis of policies approved at recent annual general meetings (AGM) by the Investment Association (IA).

Of the 93 FTSE 100 firms which held an AGM before October, 98% have aligned their contributions to new director pensions with those to other employees or have committed to doing so. More than half are doing the same for existing director pension contributions. Six firms are raising their contribution to worker pensions.

But ten FTSE 100 firms were sanctioned by the IA’s Institutional Voting Information Service (IVIS) for paying 25% or more of an existing director’s pension, with no commitment to realign before 2023. Two other firms were issued with a ‘red-top’ warning by IVIS for not committing to aligning pension contributions of new directors with other employees.

In April, UK investment managers told FTSE 350 firms they would focus their AGM voting policies on the most material issues – relating to growth, costs, and risks – during the pandemic. The IA’s analysis of FTSE All-Share AGMs shows a reduction in companies suffering shareholder rebellions during this AGM season, from 139 to 116. Executive pay was the only type of resolution that did not see a fall in shareholder rebellions, staying constant at 64.

Director re-election resolutions remained the most frequent cause of shareholder rebellions, despite falling back from 2019’s 91 to 80. Almost 50 FTSE All-Share firms withdrew resolutions related to dividends, partly in response to investor concerns about the suitability of such payments due to economic uncertainties caused by the pandemic.

“Providing directors with the same pension contributions as the rest of the workforce is fundamentally an issue of fairness. Given the economic difficulties many people across the UK are facing, it is only right that the majority of FTSE 100 companies are now aligning their executive pension contributions with their workforce,” said Chris Cummings, CEO of the Investment Association.  

The IA’s 250 members manage £8.5 trillion of assets.

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