The Investment Management Association has warned it is not desirable to ask fund managers to micro-manage companies as part of David Cameron’s crackdown on executive pay.
Cameron told BBC1’s Andrew Marr show on Sunday that legislation is likely to be unveiled in the upcoming Queen’s speech to introduce binding shareholder votes on executive pay packages. Currently, shareholders have an advisory vote on executive pay.
IMA director for corporate governance and reporting Liz Murrall says the Government is right to look at improving the role of shareholders in influencing executive pay but warns about placing too much of a burden on them. She says: “What has come from Cameron needs to be explored. There are issues around executive pay but fund managers cannot micro-manage companies. Their role is to manage portfolios to seek value for clients. We want to work with the Government to see if there is a better role for shareholders in executive remuneration pay.”
Murrall says a binding vote on pay would cut across contractual relationships between employers and employees. She says: “Remuneration structures need to be simplified. You could have a contract for the base pay and a bonus that applies to the vote.”
Premier Asset Management senior investment manager Simon King agrees that it is not possible for fund managers to vote on every aspect of executive pay and says any proposals should be limited to FTSE 100 companies but he says: “I welcome a veto on pay as it is quite difficult for shareholders to make a difference.”
ABI director general Otto Thoresen says: “UK institutional investors share the Government’s determination to strengthen shareholder rights, tackle excessive executive remuneration and improve the accountability and transparency of the companies in which we invest.”