The Investment Association (IA), the trade body representing UK investment managers, has directed firms to review their executive pay packages in the wake of the Covid-19 pandemic.
The trade body urged companies to review executive bonuses in case of suspension or cancellation of dividends.
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It also advised companies against offering executives inappropriate “windfall gains” from long-term incentive plan payments.
The trade body said: “Nonetheless, it is important for the Remuneration Committee to confirm that they will look at the general market and share price response over the performance period to ensure that windfall gains will not be received on vesting.
“Shareholders will expect the Committee to use their discretion to reduce vesting outcomes where windfall gains have been received.”
The IA said that firms should review if future long-term incentive payments should be suspended amid the crisis.
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By GlobalDataAccording to the IA’s guidance, in cases where firms have raised additional capital from shareholders or required government support, it should be reflected in the executive pay.
Moreover, it said that where employees are directed to take pay cuts, executives too should follow the same approach.
IA CEO Chris Cummings said: “Investment managers expect executive remuneration to be linked to long term company performance and aligned with the experience of its employees, stakeholders and shareholders.
“During this exceptional period we expect companies to adopt an approach that is appropriate to their business and the specific impacts of COVID-19, being careful to ensure that executives and the general workforce are treated consistently.”
