The Church of England’s £8bn (€9.3bn) investment bodies have called for executive pay to be more closely tied to managing ethical, social and environmental issues.
It’s part of a new policy on executive remuneration which also demands lower bonuses following a recommendation from the Church’s Ethical Investment Advisory Group (EIAG).
Under the new scheme, companies are encouraged to reward performance on issues like tax, bribery, human rights and environmental sustainability (e.g. greenhouse gas emissions and water efficiency).
“We want to see lower annual bonuses and greater emphasis on rewarding executives who manage ethical, social and environmental issues well and so deliver enduring corporate success over periods of five to seven years,” said the advisory group’s Chair James Featherby.
The investment bodies are the Church Commissioners, the Church of England Pensions Board and the CBF Church of England Funds managed by funds firm CCLA.
The policy calls for pay differentials to be justified by a “reasonable calculus” linking higher rewards to “greater contribution, skills and responsibility” – and that those who are lower paid are also rewarded fairly.Top managers’ pay has “become misaligned with revenues, profits and shareholder returns” while bonuses have become regarded as an entitlement contributing to corporate short-termism.
“Greater emphasis on rewarding executives who manage ethical, social and environmental issues well”
The policy won’t accept company officials’ being awarded annual bonuses of more than 100% of base salary for target performance, unless in cases of extraordinary results. And long-term incentive plans should cover five-seven year periods.
The Church wants firms to approach pay in a “holistic” way for all staff – and disclose the way in which they monitor and manage internal pay differentials and trends.
“We will work collaboratively and in particular support companies who take risks and model a different way of doing things,” the Church stated.