International investors set out five principles of executive pay

Will serve as guide during annual meeting season

A group of leading international investors including pension funds, church investors and asset managers have set out five principles on executive pay as the annual meeting season gets into full swing.
Signatories to the statement include names such as Andreas Utermann, Chief Investment Officer at Allianz Global Investors and David Blood, Senior Partner at Generation Investment Management and Swedish state funds AP1 and AP3.
Also backing the call are the Central Finance Board of the Methodist Church, the Church Investors Group and the Church of England Pensions Board. Institutions such as F&C, Hermes Equity Ownership Services and The Co-operative Asset Management are also signed up. (Full list below).
“We are concerned that rewards to executives have been rising disproportionately relative to rewards to shareholders and to companies’ perceived benefit to society,” the group wrote in a letter to the Daily Telegraph today.
“We therefore call on public companies to ensure that their executive remuneration is grounded in these five principles.”

The principles are alignment, transparency, permanent value, reward for success and appropriateness.
“Over the forthcoming annual general meeting season, these principles will guide our voting, our company engagement and, where appropriate, our contributions at company meetings.”
The statement comes after the unexpected vote against the remuneration at US banking giant Citigroup last week – which corporate governance pioneer Robert Monks has termed a “milestone” in the history of governance.And it follows an earlier letter in the same paper from charity groups urging investors to “take close interest” in how their fund managers deal with the executive pay issue.
It comes as the Local Authority Pension Fund Forum has advised its members to oppose the remuneration report at Barclays’ AGM on April 27, saying CEO Bob Diamond’s pay is “hard to justify”. “We believe the company needs a clear signal from shareholders that a different approach is required in future,” said LAPFF Chairman Ian Greenwood.
In other news, the UK’s opposition Labour Party has called for more disclosure about how asset managers vote on executive pay. It has proposed an amendment to bring into force powers contained in the 2006 Companies Act – which would enable the government to require institutional investors and fund managers to publish information on how they exercise voting rights attached to shares in publicly listed companies.
“Making fund managers disclose how they vote on issues will mean the pensioner or the ordinary investor will be in a better position to access information on how votes are cast in their name on matters such as executive pay,” Labour Business Secretary Chuka Umunna said in a statement.

Signatories to Daily Telegraph letter:
Andreas Utermann (AllianzGI), Ossian Ekdahl (AP1), Peter Lundkvist (AP3), Michael Quicke (CCLA Investment Management), Bill Seddon (Central Finance Board of the Methodist Church), Richard Nunn (Church Investors Group), Bernadette Kenny (Church of England Pensions Board), Abigail Herron (Co-operative AM), Karina Litvack (F&C Asset Management), Colin Melvin (Hermes EOS), David Blood (Generation), Ian Greenwood (LAPFF), Frank Curtiss (Railpen), Richard Maitland (Sarasin), Sarah Smart (Pensions Trust).