Remuneration, governance and regulatory environment

Newsflashes and alerts

Newsflashes and alerts

Remuneration Committee update
2023 AGM season – early snapshot (September year ends)

As we look ahead to the forthcoming 2023 AGM season, we are sharing an early snapshot of remuneration trends based on September year ends published to date, and polling results from our recent December 2022 Remuneration Committee update webinar.

You can access our snapshot here.

Upcoming events:
Webinar - Remuneration Committee Update

In this webinar, Katie Kenny and Mitul Shah will look ahead to the 2023 AGM season and provide latest insights on expected remuneration trends and the shareholder voting environment.


Progressing the ESG agenda through Reward in the Alternative Asset Management industry (November 2022) can be viewed here.

Glass Lewis Publish UK Policy Guidelines for 2023

Glass Lewis has published its 2023 Policy Guidelines for the UK. A summary of the key remuneration-related changes is provided below. This includes updated guidance on pensions, ESG metrics, single incentive plans, use of discretion and remuneration committee accountability. The full guidelines can be read here.

Key remuneration- related changes


  • In relation to previous guidance that pension provisions for both new and existing executive directors are expected to be in line with those available to the majority of the wider workforce, Glass Lewis generally believe sufficient time has elapsed since the introduction of the UK Corporate Governance Code provision for such reductions to have been made.
  • In the absence of a cogent rationale for any delay in such a reduction and/or a failure to provide a commitment to align contributions in the near-term, Glass Lewis may recommend a vote against the remuneration policy where the pension provision is not in-line with those available to the majority of the wider workforce.

Linking Executive Pay to Environmental and Social Criteria

  • Glass Lewis believe that companies that have not included explicit environmental or social indicators in their incentive plans would benefit from additional disclosure on how the company’s executive pay strategy is otherwise aligned with its sustainability strategy.

Single Incentive Plans (“Combined Incentive Plans”)

  • The guidance includes a new section on expectations around the structure of single incentive plans.
  • Glass Lewis is generally sceptical of a move from a traditional incentive framework (short and long-term incentive plan) to a structure consisting of a single incentive plan. They believe this generally leads to a reduction of the portion of variable pay linked to long-term performance, and specifically consider that the shift typically includes the removal of long-term performance conditions, with the deferred portion of the award effectively becoming a guaranteed payment once the initial performance period has ended.
  • For this reason, Glass Lewis will generally recommend a vote against a remuneration policy that includes a single incentive plan, unless:
    • The plan has a minimum vesting period of three years (and the inclusion of an additional post-vesting holding period, of typically 1-2 years, will be viewed favourably);
    • At least part of the award is allocated in equity or equity-based instruments, subject to time-vesting restrictions;
    • Quantitative underpin/gateway conditions are in place for the deferred portion of the award; and
    • The company has provided a strategic rationale for the plan.
  • Where a company is replacing a traditional short and long-term incentive structure with a single incentive plan, Glass Lewis generally expect a substantial reduction in the total target and maximum award opportunity, appropriately reflecting the reduction in the risk profile of the plan. They generally expect the reduction in the risk profile of an incentive plan to correspond with the reduction in award opportunity, e.g. if the previous long-term incentive plan represented half of the total target-level variable pay opportunity and the performance conditions on this portion of the award are removed, then the total target-level variable pay opportunity under the new plan should be approximately halved.

Remuneration Committee discretion

  • Glass Lewis recognises the importance of the remuneration committee’s judicious and responsible exercise of discretion over incentive pay outcomes to account for significant, material events that may not be reflected in performance metrics under incentive plans.
  • For instance, major litigation settlement charges may be removed from non-GAAP results before the determination of formulaic incentive payouts, or health and safety failures may not be reflected in performance results where companies do not expressly include health and safety metrics in incentive plans. Such events may nevertheless be consequential to corporate performance results, impact the shareholder experience, and, in some cases, may present material risks. Conversely, certain events may adversely impact formulaic payout results despite being outside executives' control.
  • Glass Lewis believe that companies should provide thorough discussion of how such events were considered in the committee’s decisions to exercise discretion or refrain from applying discretion over incentive pay outcomes.

Remuneration Committee accountability

  • In line with previous guidance, Glass Lewis may recommend against the re-election of the committee chair where there are substantial concerns with the remuneration policy presented for shareholder approval and/or the pay practices outlined in the remuneration report, or against the re-election of all members for particularly egregious remuneration practices. The guidance has been clarified to state that these instances may include “cases in which a company maintains egregious remuneration practices, which have existed over multiple years without any apparent steps to address the issues”.
  • In addition, Glass Lewis has expanded its guidance to state that it may recommend voting against the entire committee based on the practices or actions of its members, such as approving large one-off payments, the inappropriate use of discretion in determining variable remuneration, and/or sustained poor pay-for-performance practices.

Other remuneration-related changes

  • Glass Lewis expect remuneration policies to include post-employment shareholding requirements. The guidance now clarifies that this should be “typically over two years and comprising a majority portion of the in-employment requirements”.


  • Guidance on "External Commitments” has been updated to outline cases where Glass Lewis believe a director may be potentially overcommitted. Specifically, they will consider a director to have a potentially excessive commitment level when they:
    • Serve as an executive officer of any public company while serving on more than one additional external public company board; or
    • Serve as a non-executive director on more than five public company boards in total.
  • They will continue to count non-executive Chair positions at UK companies as two board seats given the increased time commitment generally associated with these roles.


Investment Association publishes updated Principles of Remuneration for 2023
November 2022

The Investment Association (IA) has published the following:

A summary of the key areas of focus is provided below. Key changes relate to consideration of the cost-of-living crisis, inflation and wider stakeholder impact; executive director salary increases; ESG metrics, windfall gains and non-executive director (NED) fees.

Letter to Remuneration Committee chairs

Cost-of-living, inflation and stakeholder experience

  • Remuneration Committees will need to delicately navigate the general economic uncertainty when judging 2022 remuneration outcomes and setting remuneration for 2023.
  • This will include sensitively balancing the need to continue to incentivise executive performance while ensuring the executive experience is commensurate with that of shareholders, employees, and those most impacted by the cost-of-living crisis, including vulnerable customers, suppliers and other major stakeholders.
  • Companies should clearly communicate the approach it has taken to its shareholders.

Executive director salary increases

  • In a period of significantly higher inflation, the IA consider that additional restraint should be shown for executive director salary increases. The current inflationary impact is disproportionately affecting lower-paid workers, where a greater proportion of their income will be spent on energy or food, which is seeing the greatest levels of inflation.
  • If salary increases are needed, IA members encourage Committees to consider increases below the rate of salary increases given to all employees. All salary increases, and particularly significant salary increases, will have to be carefully justified in the wider stakeholder context for the company.

Performance metrics and target setting

  • The general uncertainty may require wider performance ranges and discretion may be needed to ensure that the appropriate outcomes are achieved.

ESG metrics in incentive plans

  • There has been a marked increase in the number of companies incorporating an ESG metric into their variable remuneration. The IA recognise that many companies are still considering how to reflect this element of corporate strategy into remuneration. As such it will be increasingly important to clearly articulate the journey they are on to incorporate ESG metrics into variable pay and how they will evolve this approach in future years.
  • As with other performance measures, ESG metrics should be linked to company strategy, quantifiable and avoid unnecessary complexity.

Windfall gains

  • Many companies awarded 2020 LTIP grants in the midst of the pandemic following significant share price falls, so a greater number of shares were granted compared to previous years.
  • In 2023, Remuneration Committees will be making those vesting decisions. To ensure that participants do not benefit from being granted significantly more shares, it is important that Remuneration Committees consider if vesting outcomes need to be reduced.
  • Committees should clearly articulate to shareholders how they have considered the impact of any potential windfall gains when determining vesting outcomes and why any reduction is appropriate. If the Committee has decided not to adjust for windfall gains it should explain and disclose its rationale for doing so.

Policy review

  • IA members will expect companies to generally show restraint on the increases to variable pay opportunity in a new Policy. Any increases in opportunity should be carefully explained in the context of the business and delivery of strategy.

NED fees

  • IA members recognise that NED fees have not always reflected the increased complexity and time commitment expected of their role. The Principles have been updated to set out investor support for NEDs to be paid fees which reflect the reality of the time commitment, complexity and skillset required for their role and expectations of the Board and their shareholders.


  • For 2023, IVIS will Red Top any remuneration policy or report where executive pension contributions are not aligned to the majority of the workforce.

Updated Principles of Remuneration

The Letter to Remuneration Committee chairs states that the IA “decided not to make significant changes to the Principles of Remuneration, as we believe they continue to appropriately set out our member’s expectations on executive remuneration”.

Key changes to the Principles are set out below.

Executive director salaries - general

  • Remuneration Committees should generally not seek to increase executive salaries at a level greater than inflation or the increase awarded to the wider workforce.

Executive director salaries – new recruits

  • If companies recruit a new executive and decide it is appropriate for their initial salary to be set below the previous incumbent’s salary to reflect experience or expected development in the role, the company should clearly communicate its intended salary path, and the timeframe which it may increase salary levels.

Performance metrics (including ESG)

  • Committees should consider the collective impact of the chosen performance criteria to ensure that they lead to a balanced assessment of the company’s performance and that there is appropriate natural tension between the chosen performance metrics.
  • If ESG targets are used, it is imperative they are material to the business, quantifiable, suitably stretching, and clearly linked to the implementation of the company’s strategy. They should not reward executives for ‘business as usual’ activity nor should they be used as a vehicle to increase overall quantum. Remuneration Committees should also clearly explain how progress against these targets is being measured and how performance against these goals will be disclosed to shareholders.

Windfall gains

  • If such a situation arises where the remuneration committee did not scale back the grant-size and windfall gains have subsequently been realised, shareholders expect Remuneration Committees to consider exercising discretion to ensure that vesting outcomes are not inflated by windfall gains.

NED fees

  • IA members recognise that NED fees have not always reflected the increased complexity and time commitment expected of their role. Given the important oversight role which they play on behalf of the company and their shareholders, NEDs should receive fees that reflect the time commitment of their role on the Board and its sub-committees, and the scope and complexity of their role(s). However, where increases are deemed warranted, the reasons should be properly explained.
  • A growing number of companies have introduced minimum shareholding guidelines for their non-executive directors.

Overall quantum

  • Remuneration Committees should consider the overall quantum paid to executives in the context of pay levels and conditions across the entire workforce.
  • The Foreword to the updated Principles states that “Remuneration Committees should be mindful of widening inequality and making excessive awards to their executives at a time when many of their lower-paid employees will be forced to make significant sacrifices”.

Who to contact

If you would like to discuss this further please get in touch with your usual Deloitte contact or any of the following:

Sally Cooper Partner, 020 7007 2809 or email
John Cotton Partner, 020 7007 2345 or email
Clare Edwards Partner, 020 7007 1997 or email
Juliet Halfhead Partner, 0121 695 5684 or email
Iqbal Jit Partner, 020 7303 4101 or email
Katie Kenny Partner, 020 7007 2162 or email
Mitul Shah Partner, 020 7007 2368 or email
Ali Sidat Partner, 020 7007 2818 or email

Remuneration Committee update

Pay in a volatile environment – Approaching the year end
October 2022

In a challenging economic environment, boards will face heightened scrutiny in the coming year around executive pay decisions and actions taken to support the workforce in light of the deepest squeeze in household living standards in decades.

The update can be viewed here.

Financial Services Reward Update - May 2022
A summary of the key changes is provided here

FCA publishes its final remuneration disclosure rules under the Investment Firm Prudential Regime (IFPR) and hosts webinars to address practical implementation
A summary of the key changes is provided here

ISS UK Voting Guidelines 2022
A summary of the key changes is provided here

Investment Association publishes updated Principles of Remuneration for 2022
A summary of the key changes is provided here

Glass Lewis publish UK proxy voting guidelines for 2022
A summary of the key changes is provided here

Implementing the remuneration requirements of CRD V: Key actions for Level 3 firms
A summary of the key changes is provided here

FCA publishes final rules under the new Investment Firm Prudential Regime
A summary of the key changes is provided here

Road to net zero - incentivising leadership
A summary of the key changes is provided here

Legal and General Investment Management (LGIM) has published its revised UK Principles of Executive Pay (September 2021)

A summary of the key changes is provided here

Glass Lewis - Approach to Executive Compensation in the Context of the COVID-19 Pandemic (EMEA region)
A summary of the key changes is provided here

Investment Association sets out expectations on ethnic diversity, climate change and executive pay ahead of 2021 AGM season
A summary of the key changes is provided here

Investment Association publishes updated Principles of Remuneration 2021 and revised COVID-19 guidance
A summary of the key changes is provided here 

ISS 2021 Proxy Voting Guidelines for UK and Ireland
A summary of the key changes is provided here 

Glass Lewis publish UK proxy voting guidelines for 2021
A summary of the key changes is provided here

Remuneration Committee update

Tuesday 7 February 2023 08:30 – 10.00

Register here
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