Listed UK firms face "significant reputational ramifications" if they fail to adhere to executive pay expectations set out by the Investment Association amid the ongoing pandemic-induced crisis, the trade body has warned.
Writing to companies today (27 April) in response to remuneration committees of UK listed companies the IA set out the standards for remuneration policies investors will expect from firms as coronavirus continues to hamper business activity.
The IA told firm that while investors appreciate firms "will need to sensitively balance the need to continue to incentivise executive performance" at a time where management teams are under particular pressure, but "there are minimum expectations for every company" and remuneration committees must "take account of their individual circumstances particularly considering the impact on their stakeholders".
Significantly, the IA said that where companies that have "sought to raise additional capital from shareholders", or have required government support, this should be "reflected in the executives' remuneration outcomes".
"Failure to do so may have significant reputational ramifications," it warned.
Similar reflection, according to the IA, should be evident when companies have suspended or cancelled dividends payments.
In addition, the IA said companies should not be "rewriting their remuneration policies at this time", and if companies are seeking to propose variable pay increases they "should carefully consider if such an increase is appropriate in 2020".
The IA added: "For those companies that are yet to consult on a new Remuneration Policy, it may not be appropriate to bring forward remuneration policies with substantial changes if the company is significantly impacted by COVID-19.
"For these companies, it may be more appropriate to wait until there is greater clarity on the future market environment before proposing significant changes to their policies."
Commenting on the letter, chief executive of the IA Chris Cummings (pictured) said: "Investment managers expect executive remuneration to be linked to long term company performance and aligned with the experience of its employees, stakeholders and shareholders.
"During this exceptional period we expect companies to adopt an approach that is appropriate to their business and the specific impacts of COVID-19, being careful to ensure that executives and the general workforce are treated consistently."