Companies and investors must act now to establish executive pay practices that help employees, companies and economies
The pay disparity between top executives and the average worker has significantly widened. At the same time, there is little evidence that ratcheting up executive pay leads to better company performance. In this month’s Fundamentals, titled ‘Mind the Gap’, Legal & General Investment Management (LGIM) publishes several practical steps to align pay with stakeholders’ interests.
Total pay for executive directors has increased markedly in the past 20 years. In 1998, the average pay ratio between FTSE 100 CEOs and employees was 47:1. By 2015, this figure had risen to 129:1.
Pay inequality has come under increased scrutiny in recent months, with Theresa May driving the issue forward as part of her leadership campaign. The focus on executive pay by regulators, the media and civil societies has also manifested in the high level of dissent at this year’s AGM season.
LGIM supports the idea that companies demonstrating good long-term performance should be able to reward their executive management team. However, continuously increasing executive pay is neither beneficial to shareholders nor to society at large.
Angeli Benham, Corporate Governance Manager at LGIM (photo, above), says: “We call on companies and investors to act now to address mounting executive pay. We believe there are many changes companies and investors can implement, including reducing short-term bonuses and publishing pay ratios. This will help to align incentives with long-term value creation for investors and create fairer pay structures.”
For more information please contact:
Media Relations Manager, LGIM
t: +44 (0) 20 3124 4355
Notes to editors
Legal & General Investment Management
Legal & General Investment Management is one of Europe’s largest asset managers and a major global investor, with total assets of £853 billion*. We work with a wide range of global clients, including pension schemes, sovereign wealth funds, fund distributors and retail investors.
Throughout the past 40 years we have built our business through understanding what matters most to our clients and transforming this insight into valuable, accessible investment products and solutions. We provide investment expertise across the full spectrum of asset classes including fixed income, equities, commercial property and cash. Our capabilities range from index-tracking and active strategies to liquidity management and liability-based risk management solutions.
* LGIM internal data as at 30 June 2016. These figures include assets managed by LGIMA, an SEC Registered Investment Advisor. Data includes derivative positions and advisory assets.