City’s top investors back FTSE’s ‘competitive’ payouts amid London stock market fears

Investors managing more than £9tn of assets have backed a more competitive approach to UK wages in the boardroom amid growing debate over London’s attractiveness as a listing destination.

The Investment Association (IA), the industry’s influential trade body, will on Wednesday publish a revised set of remuneration principles aimed at the UK’s biggest listed companies, Sky News has learned.

The updated guidelines include a simplified template for boards of firms that have in the past complained of a lack of clarity about investors’ expectations of executive pay packages.

City sources said the IA sought, following feedback from members, to take a more pragmatic approach to an issue that has often become a sticking point in board-shareholder relations.

The revised IA principles will continue to emphasize the importance of long-term value creation in remuneration policies, with pay levels explicitly linked to company performance.

It will also emphasize the need to “support individual and company performance in the context of sustainable long-term business financial health and sound risk management,” according to a person familiar with the updated principles.

Crucially, the IA will stress that there needs to be “flexibility” in companies’ approach to the CEO and that its members “want a competitive UK listing environment that attracts high-quality companies to list and operate in the UK , while delivering long-term value for their shareholders,” the source added.

The publication of the revised guidance by the IA comes eight months after it wrote to the chairmen of the remuneration committees of FTSE-350 companies to admit that the pay gap with US peers was making it harder for London-listed companies to compete.

In recent months, a series of companies led by Paddy Power owner Flutter Entertainment have announced plans to move their primary listings from London to New York.

The city also missed out on a series of prestigious initial public offerings (IPOs), with chip designer ARM Holdings opting to launch in the US and private equity firm CVC Capital Partners listing in Amsterdam.

London Stock Exchange Group executives deny they are concerned about the outlook for UK public markets, although the debate has prompted the Treasury and Financial Conduct Authority to change UK listing rules to make London a more attractive prospect.

An acid test for the UK will arrive in the coming months when Shein, the China-based online fashion group, decides whether to pull the trigger on one of the city’s biggest initial public offerings in history.

Read more from Sky News:
Nandy to meet Premier League clubs amid ‘threat of civil war’
Water companies ordered to refund £157m on customer bills
Reeves will meet with bank chiefs

One chairman of a FTSE-100 company said on Tuesday night that he welcomed the IA’s revised guidance and that it would make future pay discussions “more focused on the fundamentals of our business and its performance”.

Data from this year’s annual meeting season shows that relations between companies and their investors have already begun to improve, with the number of pay decisions affected by significant resistance halving compared to 2023.

Companies including Compass Group and LSEG are among those that have sought or are seeking shareholder approval to increase the pay of their bosses.

IA declined further comment Tuesday night.