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Sky News has reported that Hermes investment management firm introduced the document to the chairs of FTSE 350 companies’ remuneration committees.
This is the first time a leading fund manager would make such a call.
Hermes is said to have drafted its proposals in recent weeks, a final document is expected to be introduced the following month.
The document reportedly suggests that the firms establish the figure which a CEO’s pay would not exceed the sum then agreed with investors.
It was also said to have chastised the UK’s existing executive pay scheme, stating that “too often remuneration committees fail to exercise their judgement and discretion”.
The document proposed the CEOs at FTSE 100 companies to hold shares worth five times their base salary and that remuneration committee chairs should embody the views of company employees.
The letter had followed the massive concerns in the industry caused by the salary figures of its most outstanding individuals, with a study conducted by Deliotte the previous month demonstrating that investors are worried about the paucity of transparency and disclosures at some FTSE 100 firms.
The research indicated that only 26% of the major 30 UK firms managed to get 95% backing from their shareholders this year, despite the fact that the previous year more than half of them reached this threshold.
It also indicated that 8 firms in the FTSE 100 failed at getting 75% approval for their plans, with 2 missing the 50% majority mark.
Hermes’ letter also comes just weeks before UK Prime Minister Theresa May is expected to release a range of proposals for reforming boardroom behaviour.
A recent article released by FTfm, based on its own study, also showcased that CEOs in the asset management industry are receiving bonuses 15% higher than their salaries last year.