INVESTMENT ASSOCIATION 2024 LETTER TO REMUNERATION COMMITTEE CHAIRS 

Investment Association Principles of Remuneration

The Investment Association (IA) issued a letter to Remuneration Committee chairs on Friday 23 February 2024 which replaces the annual update to the Principles of Remuneration last expected in November 2023.

The letter sets out guidance on interim themes for 2024 on investor views on executive compensation pending a "fundamental review" of the Principles of Remuneration later in 2024.  

This fundamental review will reflect both evolving IA member expectations and feedback from companies; and will also aim to simplify the principles, by:

•  removing duplication with the UKCGC and 

•  ensuring an evolution of the principles, so these are not seen as

  dictating market practice.

The main points in the 23 February letter are:

•  The IA and its members are both "keen to understand the key

  issues" and "determined" to ensure UK pay is competitive

•  The overarching principle is for high pay to align pay and performance

  clearly in support of long-term shareholder value

•  The principles are not rules, they flag good practice and encourage

  explanation for divergence

•  IA members have differing views on UK executive compensation

  governance

•  The welcome sensitivity to the wider scene shown by companies in

  2023, is expected to continue in 2024, particularly on pay inflation,

  target setting, and outcomes approval

•  The IA conducted a round table exercise in September 2023 with

  nearly 100 companies of the FTSE 350 which showed:

  • Higher LTIP grants may be needed for the UK to be competitive, particuarly against the USA

  • "Hybrid Schemes" would be welcome by companies, which involve LTIPs with multiple vehicles including restricted stock

  •  Companies suffer executive low "Perceived Value" from governance issues such as:

    • LTIP post vest holding periods, 

    • post-employment shareholding,

    • executive shareholding guidelines and

    • Malice and Clawback

A copy of the letter can be found here:

Newspoint will be issuing some thoughts on the implications of this development soon.

Executive Compensation and Incentive Design

Reward and Share Plans 

Remuneration Advisory and Support

ESG and Sustainability

Please feel free to email or call:

Damian Carnell - [email protected] +44 (0) 7989 337118

VA Bec Bostock - [email protected]

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