11/09/2024
Debates around high executive pay at companies can be fractious, with advocates who are in favour of escalating pay packages making the case that such awards are necessary to attract, motivate and retain senior leaders.
The Church of England Pensions Board believes that focusing simply on high pay practices at the top of a company tells only a partial story, and that whether this pay is justified must be viewed in the context of the process that companies go through to reach these decisions, as well as the outcomes experienced by different stakeholders – including the lowest paid. This is particularly important given the growing gap between the highest and lowest paid in society, and questions about inequality in the wider society in which companies operate.
This is why, together with a group of UK asset owners and the High Pay Centre, we have spent the past two years developing the Fair Reward Framework, a groundbreaking methodology and tool to help inform both our own engagements and those of other investors on these issues with the companies in which we are invested.
“It’s in our interests as a responsible, long-term investor that everyone across a company can recognise that they are treated fairly when it comes to how their commitment to the company is acknowledged and rewarded,” said Clare Richards, Director, Social Factors, at the Church of England Pensions Board. “Inequality has a negative impact on people’s trust in the economy and a knock-on effect on social stability: we have a responsibility to our beneficiaries to address this.
“We are committed to addressing corporate pay practices and will be applying insights from the Fair Reward Framework to how we engage with and vote at the AGMs of companies in which we are shareholders. This will be a key contribution to our decision making and we trust will have wider market uptake as a rigorous and independent source of analysis of company pay practices.”
The Church of England Pensions Board’s investments team exercises its rights to vote at company AGMs, including on executive remuneration. In 2023, supported by advice from the Ethical Investment Advisory Group of the Church of England, the Pensions Board voted against the pay recommendations of management 40% of the time (against or abstain), and against the management of 32 UK listed companies because they were not living wage accredited employers. The Fair Reward Framework will help us refine this strategy to act on the belief that fair reward is an important topic for long-term investors, and is strongly linked to social license, inequality, and consequently systemic risks to our investment portfolio and wider society.