Leading pension funds have joined forces to urge companies to reform how they award huge bonuses to directors, to avert government legislation.
The UK's 750 largest companies will this morning receive a letter from 15 financial institutions that calls on them to put remuneration committee reports to a shareholder vote.
The move would, the group said, "encourage a climate which legitimises high rewards for exceptional performance" and give shareholders "the opportunity to support you in your attempts to maintain a close link between director's pay and company performance".
The group includes Hermes Pensions Management, whose chief executive is Alastair Ross Goobey, Gartmore Investment Management and the British Coal Pension Schemes. They argue that making directors' pay subject to shareholder approval prevents voting against the re-election of remuneration committee members to protest pay packages viewed as excessive.
The letter was issued as the Department of Trade and Industry weighed legislation that would oblige companies to have shareholders vote on approving directors' pay.
The Royal Bank of Scotland, criticised for awarding £2.5m of special bonuses to four directors after acquiring National Westminster Bank, was unmoved by the letter. A spokesman said: "When the Government makes its views clear we will take account of them."
About 20 per cent of voting shareholders opposed the re-election of the chairman of the RBS's remuneration committee.Reuse content