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Nest to challenge companies over executive pay

Government-backed pension scheme the National Employment Savings Trust has set out plans to challenge the com­panies it invests in over exec­utive pay, the appointment of auditors and the diversity of board membership.
Nest began accepting contributions from pension investors in July last year and is expected to become one of the largest institutional asset owners in the UK.
This week it published its approach to corporate governance and its voting policy and it is critical of the way executive pay is calculated and used to incentivise board members.
 It says: “We believe that many of the processes driving the level of executive pay upward are systemic. There is the interconnec­tedness of directors and com­panies, the use of board consultants with similar practices and advice, checklists of multiple parts to pay and the use of relative reference points such as pay elsewhere.
“These have created herd-like behaviour across companies. The causes that are now sounding alarm bells among directors and shareholders need to be urgently addressed but voting alone is unlikely to bring about the change in culture many see as vital.”
In addition, Nest says it will vote against the re-election of the chair of a firm’s nomination committee if the firm fails to disclose a target for the number of women it aims to have on the board and there is no indication of progress in electing women to the board.
AWD Chase de Vere head of communications Patrick Connolly says: “As Nest becomes larger and invests more money, it will become a significant voice if it decides it wants to be actively involved in corporate governance issues.
“But for advisers, the most important thing will remain Nest’s proposition rather than its voting policy.”

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