Pensions 

Calls to 'name and shame' executives over pensions

Calls to 'name and shame' executives over pensions

A Parliamentary committee is recommending that the regulator due to replace the Financial Reporting Council seeks public explanations from any company that fails to align its executives' pensions with the majority of its staff.

This recommendation was made today (March 26) by the Business, Energy and Industrial Strategy committee in its 45-page report Executive rewards: paying for success.

The group of MPs – which call for a stronger link between executive and employee pay and a move away from unpredictable and excessive bonuses – is also advocating greater alignment in the way pension contributions are shared between executives and employees.

The report stated chief executives in FTSE 100 companies have enjoyed rates of about 25 to 30 per cent, whereas their employees received only 9 to 10 per cent.

This was an "unacceptable example of weak corporate governance and flagrant disregard for any notion of fairness," the MPs said.

The committee mentions the new corporate governance code, which contains a provision that pension contribution rates should be aligned with the workforce, and this is amplified in the Investment Association’s remuneration principles.

In November 2018, the IA published its principles of remuneration which set out investor expectations on executive pay, and highlighted high pension contributions as a key concern.

It stated pension-related payments should not be used as a mechanism for increasing total remuneration, and pension contribution rates for executives should be aligned with those of the workforce.

In February, the professional body announced it would name and shame companies that pay high pension contributions to executives, and pressure has led to HSBC and Lloyds Bank changing their policies in alignment with IA principles.

Labour MP Rachel Reeves (pictured), chairwoman of the BEIS committee, said workers and not just the chief executive should share the profits of a well-functioning company.

She said: "Why should chief executives have a more generous pension scheme than those who work for them? Getting workers on remuneration committees and including staff in profit-sharing schemes should be the first steps to this end.

"Investors and remuneration committees have too often failed to rein in pay. When they fail, we need a regulator with the powers and mindset to step in and get tough on businesses who pay out exorbitant sums to their CEOs."

Ms Reeves noted that public scrutiny "has often had more influence than investors or remuneration committees in getting companies to reverse outrageous executive pay decisions".

She added: "The glare of publicity cannot be the only weapon in the armoury, but companies should be assured that the BEIS committee will continue to shine a light on executive pay and hold businesses to account for their actions on CEO rewards."

maria.espadinha@ft.com