The Business, Energy and Industrial Strategy Committee has called for ‘greater alignment’ of the pension contributions of executive and employer pay.
Publishing its report, Executive rewards: Paying for success, the committee noted that it has previously advocated greater alignment in the way in which profits are shared between executives and employees. “The same should apply to pension contributions,” the report said.
The report stated that there has been a tendency for a crackdown on one element of pay to lead to corresponding increases in other elements.
“Pension contributions is one such area, where chief executives in the FTSE 100 have enjoyed pension contribution rates around 25- 30 per cent, while their employees receive around 9-10 per cent; an unacceptable example of weak corporate governance and flagrant disregard for any notion of fairness,” the report said.
In particular, the committee criticised the banks, Lloyds and HSBC, for “seeking to flout the spirit” of the principles in the new Corporate Governance Code, and the Investment Association’s remuneration principles on the provision of pension contribution rates.
The report said the banks have offered substantial alternative pensions advantages to their chief executives, to compensate for the alignment of pensions contributions. However, it said that it was “reassuring” to see that investors and staff have protested.
“There are indications that some companies are now acting to ensure greater alignment. This should have happened much sooner. We welcome the Investment Association’s announcement in February 2019 that it will monitor and flag up any company that pay pension contributions to new directors in a way not aligned to the majority of the workforce and we recommend that the new regulator seeks public explanations from any company that fails to deliver alignment on pensions contributions,” the report stated.
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