In part this shift toward simpler remuneration packages is related, LGIM said, to its announcement in 2013 it would vote against multiple and complex pay schemes. And, it is a trend it expects to continue.
“For many years LGIM has been requesting that companies simplify their remuneration structures by only operating one long-term share scheme. We consider that having multiple share schemes risks rewarding executives for the same performance and therefore mis-aligning executive pay with long-term shareholders,” the firm said in its latest corporate governance report.
In 2015, the firm revealed it voted against at least one resolution at 18% of UK companies, the bulk of which were related to remuneration.
It added: “LGIM voted against 93 resolutions on remuneration in the UK market in 2015. There was just one company that lost its remuneration vote – Intertek – for guaranteeing a bonus for its incoming CEO on top of a salary that was higher than his predecessor. This bonus was subsequently withdrawn.
It also opposed the re-election of eight remuneration committee chairs due to “ongoing concerns with remuneration”.
Looking ahead, Sacha Sadan, director of corporate governance at LGIM said he expects pay ratios, which he defined as CEO pay relative to the average employee, will become a hot topic in 2016.
“The SEC is making reporting of pay ratios mandatory in the US in the future and this is going to put a lot more pressure on companies everywhere. The reason is executive pay has risen faster than the average workforce pay.”