Companies that axe dividends and accept Government support to survive coronavirus pandemic should cut bosses’ pay
Companies that axe dividends and accept Government support to survive the coronavirus pandemic should cut bosses’ pay, a City investment group has warned.
The Investment Association (IA), which represents the UK’s biggest asset managers and pension funds, said firms will need ‘to take account of their individual circumstances particularly considering the impact on their stakeholders’ when deciding executive pay.
In guidelines published yesterday, the IA said companies that have cancelled or suspended dividends, but have already paid bonuses for the 2019 financial year, should consider taking back some of those awards. Or they should commit to reducing their executives’ 2020 bonuses, the IA said.
Guidance: The Investment Association said firms will need ‘to consider the impact on their stakeholders’ when deciding executive pay
Firms should not lower their performance standards because of the impact of coronavirus to allow bosses to claim higher bonuses.
And if companies are struggling to come up with meaningful future targets to decide how long-term incentives should be awarded, then they may postpone the grant of these awards or delay a decision on the performance conditions.
The demands come as Royal Mail angered investors with its refusal to cut executive pay, despite slashing its dividend in a move damaging to postal workers who own shares.
Chris Cummings, chief executive of the IA, said that during this ‘exceptional period’ they expect companies to be ‘careful to ensure that executives and the general workforce are treated consistently’.