Ethical Performance
inside intelligence for responsible business


Pirc puts directors’ pay in the spotlight

April 2002

A new ratings system has been unveiled to help institutional investors identify companies offering their directors ‘excessive’ remuneration packages.

The ratings, drawn up by the UK corporate governance consultancy Pensions and Investment Research Consultants, are designed for use by investors when deciding which remuneration schemes to vote against in annual meetings.

They give businesses an overall rating on a scale of A down to C in two areas – remuneration reports and share incentive schemes. Companies will be marked against a number of factors, including whether the pay of their directors is broadly in line with other companies in their sector. They will be marked down hard if incentive bonuses represent more than 150 per cent of director salaries in any one year.

The detail of reporting on the remuneration of individual directors will also affect the rating a company receives.

Pirc recommends that investors should support a remuneration scheme if the company receives a B rating or higher, but should vote against companies given a C rating.


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