Britain’s bosses have been given the green light to pay themselves more by their institutional owners.
Institutional trade body the Investment Association made the call in a new set of guidelines issued today designed to halt a brain drain of top management talent to better-paid jobs in the US.
After years of its members hectoring bosses over pay, the IA now says it will introduce principles to enable them to vote through large awards without breaching any guidelines.
Numerous surveys have highlighted the pay gap between UK chief executives and their US counterparts.
Pascal Soriot, the chief executive of AstraZeneca PLC (LSE:AZN), topped the UK FTSE 100 league last year at £16.9 million, but this was a fraction of the salaries of Tesla’s Elon Musk and Apple’s Tim Cook.
It is less even than the boss of Pfizer, which famously tried to buy Astra in 2014 but is now worth around £55 billion less.
AstraZeneca is now the UK’s largest public company at £180 billion after seeing its value rise by 70% over the last five years, but 35% of its investors still voted against Soriot’s pay award in April.
According to the IA, the new guidelines will allow pay deals to be approved if they are linked to performance; these will aid the long-term health of businesses and sustain the share price.
Around 200 investment firms belong to the IA, speaking for more than £9 trillion of assets under management.
Andrew Ninian from the IA said the new principles aim for companies to adopt a structure that makes sense for them and the market where they operate. “We expect early engagement on any potentially novel changes,” he said.
Executive pay plays an important role in driving and rewarding results, Ninian added.