Hermes Investment Management has addressed FTSE 350 bosses on executive pay as it prepares to launch a publication on the issue later this month.
A letter circulated amongst the remuneration committees of the UK’s largest companies, recommends establishing a salary cap and letting company employees have a say on salaries. It warns pay structures should “not be blind to erosion in company value” and that FTSE bosses should hold shares worth five times their salary.
Prime Minister Theresa May is shortly expected to publish a series of proposals on reforming executive pay.
It is understood Hermes will publish its view on the issue in a couple of weeks.
Co head of EOS at Hermes Dr Hans-Christoph Hirt says investors should be voicing their expectations on remuneration ahead of the 2017 voting season.
Hermes wants to see “simpler packages, lower variable pay, much higher shareholding requirements and stronger accountability of remuneration committees”, Hirt says.
“There are significant problems with executive remuneration in the UK, including the complexity of packages, a weak link between pay and corporate performance and in a number of cases excessive quantum.
“As a result, the public has lost trust about the governance of executive pay.”