How will the upcoming general election influence future changes in executive remuneration?

April 25, 2024

The question of the future of executive remuneration is often raised around the time of a general election, with both executives and their employers keen to understand what the future might hold.

MM&K’s Partner, Stuart James shared his insights at the 2024 Employee Share Ownership Centre’s Share Plans Symposium on Thursday, April 25. Stuart joined other industry experts including Suzannah Crookes of Tapestry Compliance and Darren Smith of Global Shares for a panel session on ‘Anticipating Issues In Executive Reward, Investor Guidance, And Communications.’

In a webinar prepared as part of a series for the Symposium, Stuart acknowledged that, whilst it was impossible to predict the future with absolute accuracy, there were important clues – some of which were coming from political parties and others from wider sources.

The key points made were:

  • A change to the rate of capital gains tax applicable to carried interest (perhaps to around 30% – 32%) is more likely than it being treated as income (taxable at 45%). However, one of the potential knock-ons of increased taxation for PE/VC businesses is further scrutiny around the “cost” of remuneration packages for executives in portfolio companies.
  • If the polls were to be followed and Labour forms the next government, then the piece of proposed legislative change which would have the biggest impact on executive remuneration would be charging VAT on school fees. Statistically and demographically, those at executive level are the ones most likely to have children at private school.  Whilst executives will have to shoulder this burden, there is likely to be a pressure on Boards to increase short term pay to assist with this situation.
  • There is little talk in the general market around executive bonuses and benefits – which might indicate the current levels are acceptable. Although, there is a question as to whether increased salaries may need to be offset against other parts of the short term remuneration package.
  • The wind of change finally seems to be coming around diversification of LTIP structures, with firms being more confident to create plans which suit them, rather than following the market “status quo”.

In his talk, Stuart also explored the potential impact of PISCES in respect of making share awards more meaningful/useful for growing companies, as well as the implications of US influences over pay structures.

Should you want to know more or want someone to help you explore your thinking on this, please contact Stuart James in the first instance.

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