L&G embarks on campaign for pay transparency

UK-Currency-Money-Coin-Pounds-GBP-700x450Legal & General Investment Management wants FTSE 350 bosses to meet with employees once a year to justify their company’s pay practices.

According to the Telegraph, the fund manager has written to the companies in recent weeks to lay out a campaign to make executive pay more transparent.

LGIM’s proposals include publishing the difference between top executives pay and the wider workforce as well as capping bonuses at two times annual salary. It also wants companies to move away from performance-related long-term incentive plans to a restricted shares model instead.

The campaign includes a call to stop basing executive pay on what rival companies award and says the gap between pension contributions for executives and employees should be reduced.

LGIM corporate governance manager Angeli Benham says: “We believe there are many changes companies and investors can implement. This will help to align incentives with long-term value creation for investors and create fairer pay structures.”

LGIM has released a research paper on the topic of high pay.

The paper says: “High pay does not always guarantee performance.Total pay for executive directors, and particularly chief executives, has increased sharply over the past decade. When compared to the performance of the market, the increasing level of executive pay is becoming difficult to justify.”

In April, Legal & General chief executive Nigel Wilson said executive pay was not fit for purpose and has resulted in a poor alignment of interests between executives, shareholders and companies.

Wilson’s pay package was £5.5m in 2015. L&G had originally reported it was £4.7m after a miscalculation.

Prime Minister Theresa May has said in her Conservative party leadership campaign that she would crack down on executive pay and ensure more employees are represented on boards.