20 pledges for 2020: How the coronavirus crisis could spell the end of massive pay days for company bosses

Fund managers say they will prioritise the reaction to Covid-19 by businesses as part of engagement programmes. Some will hold boards to account with their votes. But how many?

At least some city fund managers plan to make an issue of corporate coronavirus bad behaviour (AFP/Getty)

Optimism? It’s been hard to find of late. Although the markets have recovered somewhat, a lot of people will still be nursing sizeable losses, and the economic backdrop is anything but sunny.

Still, those who invest with a conscience have grounds to feel a smidgeon of encouragement.

The asset management industry appears to have recognised that large parts of its clientele have been less than impressed with the behaviour of some public companies.

The Investment Association, the money management industry’s trade body, has issued guidance for pay setting remuneration committees. It makes it clear it does not want to see CEOs getting unwarranted windfalls through being granted free shares at prices that are currently low but could recover in the event of a sustained recovery.

It also wants their rewards aligned with those of their workforces.

“Whilst there are minimum expectations for every company, shareholders expect Remuneration Committees to take account of their individual circumstances particularly considering the impact on their stakeholders,” says the IA.

“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,” CEO Chris Cummings states.

Measured language, but a read through of the guidance makes the IA’s expectations quite clear.

The trouble is, some recidivist remuneration committees have proven all too capable of turning a tin ear to this sort of thing.

My conversations with some of the more progressive fund managers, however, suggest that they plan to reinforce the point, not just on the issue of bosses' pay, but also on corporate conduct through the crisis more generally. That’s important when some companies have excelled themselves with their crass behaviour.

Says one, which has long been in the ESG (environmental, social, governance) fund sector: “Obviously the Ethical fund has a strict screening policy. This can only be altered with permission of holders.

“However, that does not inhibit us from engaging with companies we believe are not behaving in a responsible manner.”

The manager is at pains to stress that it is “monitoring corporate behaviours” especially with regard to those which have furloughed staff, cancelled dividends and sought funding from shareholders.

“We will be ensuring this is taken into account in remuneration for executives, once the disclosures have been made in the annual reports. Where we believe companies have not acted in a responsible manner, we will hold the directors accountable for their actions.”

Another tells me that “the whole crisis this year and how boards have behaved and treated their stakeholders will be a big focus of our engagement for next year”.

So it isn’t just from the media that companies risk earache. They’ll be getting it from some of their big investors too.

How this will be reflected in AGM voting remains to be seen.

I would expect the asset managers I talked to to follow through. But some of their peers still adhere to an outdated, old school model, that excuses even the very worst type of conduct from those at the top.

For the ethical investor, the best response is to direct their money to those that had a good record of voting and publishing their decisions before the crisis got underway.