The world’s largest asset manager BlackRock is threatening to vote against the re-election of board directors who don’t rein in outsized pay packages for its top executives.
BlackRock is set to outline its new position in a letter to bosses of remuneration committees of the biggest 350 companies in the UK.
Other asset managers have been submitting their responses to MPs on the Business, Energy and Industrial Strategy Committee on whether governance reforms four years ago, which gave shareholders annual votes on executive rewards, had worked.
“We will be voting against [remuneration] committee chairmen if we think there is a disconnect between [executive] pay and performance,” Amra Balic, head of BlackRock’s Europe, Middle East and Africa investment stewardship team, told MPs at a hearing on Tuesday.
Blackrock’s Balic had previously said that “pension provisions as a percentage of salary should be in line with those received by the wider employer base” in a submission to the parliamentary committee.
Last week the government put out a green paper on corporate governance reform, suggesting that shareholders should have a binding annual vote on pay. It also suggested forcing companies to set out the difference between top executives’ pay and that of average workers and extending the holding periods for share awards from a minimum of three years to five.
Helena Morrissey, chairman of Newton Investment Management, highlighted the gap between the rewards of bosses, shareholders and workers: “FTSE is trading at roughly the same level as it was 18 years ago and in that time executive pay has more than trebled, which suggests a lack of alignment.”
Morrissey had also been an advocate of worker representation on the board’s remuneration committee. She had previously written to the committee and stated: “A worker representative on the Remuneration Committee would certainly be a big step forwards and I believe could lead to radical and positive improvement in the current problematic area of executive pay,” she said.
To listen to the Parliamentary session click here.
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