Group demands restraint on bonuses
Friday November 13 2009
One of the country's largest shareholder groups told bosses of the UK's top firms to act with "restraint" as the annual round of bonus payments looms.
The National Association of Pension Funds (NAPF) - which represents 1,200 pension schemes controlling assets of around £800 billion - has written to chairmen of the country's 350 biggest businesses to reinforce their demands on executive rewards.
In the letter the NAPF called for a review of accepted best practice remuneration policies, which it said failed to serve management and shareholders well.
"The objective should be to create simpler structures which better align interests over the long term and which expose management to significant financial risk in the event of failure to achieve agreed goals," it said.
The organisation welcomed increased share ownership by management as a way of ensuring executives have financial stakes in firms.
And it called for an increase in the practice of paying deferred bonuses in shares rather than cash.
NAPF, which wrote to the firms initially in February, said there was a "continued need for restraint" on executive pay and warned that it would maintain pressure over remuneration policies.
David Paterson, head of corporate governance, said the group appreciated that companies had made efforts to constrain pay policies this year.
But it stressed the importance of continuing to link rewards to results and the long-term interests of shareholders.
"Shareholders in turn need to play their part by remaining vigilant and ensuring that boards are held to account for their pay policies through ongoing discussion and also by the use of their votes at annual general meetings," he said.
Press Association
