CMIT's open letter on corporate governance reform

The Capital Markets Industry Taskforce (CMIT) is comprised of leading organisations from across the financial markets ecosystem to drive forward the development of the UK’s capital markets. They have recently published an open letter on corporate governance reform and a few highlights relevant to executive remuneration are:

In today’s truly global market for talent, the attraction, retention and reward of talent is a key component of competitiveness. This does not mean an endless rise to global reward levels, but boards need to be able to make – and justify – decisions on reward as they do on other strategic matters.

Agreement should be reached between investors and issuers that UK listed companies should enjoy a level playing field with regard to the remuneration frameworks accepted for listed and private market peers in Europe and the US. Such equivalence should be implemented by investors in terms of setting out their approach and expectations. At present, the divergence is marked and has become in many industries, particularly those with a global footprint, a significant recruitment and retention issue, talent drain and a growing deterrent to listing on the UK’s main capital markets.

In considering remuneration policy, the question of reward quantum should be separated from structure; this is a matter for boards to justify to investors in their own particular circumstances, with benchmarking appropriate to the relevant competitive environment or phase of development being used to help determine that quantum. The aim should be to encourage simple remuneration structures that clearly align the interests of shareholders and management with simple reporting that is easy for investors to digest and less time-consuming for issuers to produce.

Restricted share awards: the current provisions in the IA’s Principles of Remuneration that provide that the discount rate for moving from Long Term Incentive Plans to restricted share awards should be at least 50% of the normal grant level should be removed.

More information is at CMIT-Open-Letter-Corporate-Governance-with-signatories.pdf (capitalmarketsindustrytaskforce.com)