Executive Director Pensions and Post-Employment Shareholding

Our December e-news described the new Investment Association (IA) Remuneration Principles published on 22 November 2018.  On 23 January 2019, the IA announced the specific approaches which IVIS will take at AGMs in 2019 on two of its new requirements: Executive Director Pensions and Post-Employment Shareholding Periods.  These apply to companies with year ends on or after 31 December 2018.

Executive Director Pensions
The new Principles recommend that pension contribution rates for executives should be aligned with those available to the rest of the workforce.  The IA has announced that, to avoid a “Red top” header:

• New Remuneration Policies seeking shareholder approval in 2019 should make it explicit that any new appointees will have their pension contributions set in line with those provided to the majority of the workforce; and

• New appointees from 1 March 2019 must not have pension contributions at a higher level than a majority of the workforce.

Resolutions to approve Remuneration Policies and Remuneration Reports will be “Amber topped” if an existing Executive Director receives a pension contribution of 25% of salary or more.
Companies are asked to disclose the pension contribution level which they consider to be available to the majority of the workforce and to confirm whether or not contributions to Executive Directors are at that level.

Post-Employment Shareholdings
The new Principles recommend that companies should require Directors to continue to meet shareholding requirements for a period of at least two years after their employment ends.  The number of shares to be held should be not less than the lower of the company’s shareholding requirement in force immediately before leaving and the Director’s actual shareholding at that time.

The IA has announced that if there is a Remuneration Policy vote this year it should include post-employment holding periods in line with these new Principles; otherwise the Policy will be “Amber topped”.

Notes:
A “Red top” header in IVIS reports shows the strongest level of concern.  An “Amber top” header raises awareness to particular elements of a report.

Contact Mike Landon or your usual MM&K contact for more information on 020 7283 7200.

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