On 22 November 2018, the IA published its principles of remuneration for 2019 against the backdrop of the 2018 Code. The IA noted that its members were frustrated that some companies were not responding to their shareholders' views in relation to their remuneration policies.

In response, the IA issued revised principles of remuneration, including in respect of:

  • Performance adjustments and clawbacks — remuneration structures should include specified circumstances in which the company is allowed to make performance adjustments (i.e. the company forfeits all or part of an incentive award before it has been vested and paid) and/or initiate clawbacks before awards are made. The new principles require remuneration committees to consider the most appropriate trigger events on a case-by-case basis.
  • Shareholding requirements and post-employment holding periods — the principles have been updated to outline which shares can count towards the shareholding guidelines and the expectation of investors on postemployment holding periods.
  • Pensions — the 2018 Code states that only basic salary should be pensionable and pension contribution rates for executive directors, or payments in lieu, should be aligned with those available to the workforce. Investors expect new executive directors and directors changing roles to be appointed on this pension contribution level. The pension contributions for current executive directors should be reduced over time to equal the rate received by the majority of the workforce.
  • Restricted shares — the principles provide an update on investor expectations for those companies seeking to introduce a restricted share scheme. A majority of members are willing to consider the introduction of restricted shares. In considering whether to support the introduction of a restricted share scheme, investors will compare the previous pay-out levels to historic company performance and reflect on the level of trust they have with the remuneration committee when assessing any proposals.
  • Leaver provisions — the principles have been updated to reflect member expectations and current best practice, for instance, where individuals opt to terminate their employment or they are considered a "bad leaver", any unvested options or conditional share-based award should normally lapse.

The principles of remuneration can be accessed here.

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