The Investment Association will identify companies who pay higher pension contributions to directors when compared to the rest of their workforce.
The IA says that this is a clear corporate governance issue in regards to fairness and equal pension pay.
This information will now be included within data provided by the IA’s Institutional Voting Information Service (IVIS). This provides corporate governance research to shareholders to aid decisions during the AGM season.
This information is also utilised by many companies as part of their ESG analysis for stock selection.
This information service will also do more to highlight companies who are lagging behind on diversity quotas at board level.
As part of this data, IVIS will flag-up ‘red top’ companies. These will include companies who pay newly-appointed directors pension contributions which are not in line with the majority of their employees. This is the highest level of warning available, and indicates where shareholders should have the most significant and serious concerns about corporate practices.
This ‘red top’ warning will also flag up companies that have no, or only one woman, on their board. On this issue IVIS will give an ‘amber top’ warning on companies that are not on track to meet the requirement of the Hampton-Alexander review. This stipulates that women should make up at least a third of board members by 2020. Amber warnings will be given to companies where women make up a quarter or less of board members.
The Investment Association director of stewardship and corporate governance Andrew Ninian says: “The IA’s Remuneration Principles set out shareholder expectations on executive pension contributions and our members have been clear this is an issue of fairness, and pension contributions should be aligned with the majority of the workforce.”
This is likely to be a particular issue with companies who have large proportion of their staff on the minimum AE contribution levels. If directors pay themselves more generous pensions this will be highlighted by this IVIS data.
Ninian says this new IVIS approach will address this important issues of equal pension pay.
He adds: “Similarly, the Hampton-Alexander review has set the roadmap to deliver greater diversity in the boardroom, but a frustratingly high number of companies are still failing to follow it.
“Our strengthened IVIS approach reflects the fact investors want to see companies do more than take a tokenistic step of appointing a single woman to their board and consider that job done.”
He adds: “Evidence clearly shows that more diverse boardrooms make better decisions. Investors want to see greater diversity in the companies they invest in to ensure our savers and investors are getting the best returns possible.”