The efficacy of London’s capital markets ecosystem has been an important topic of discussion recently, but one critical element that has not received enough attention is the UK’s approach to executive compensation.
The objective of our capital markets is to support the creation of globally consequential companies in the UK to drive innovation, jobs and growth in the economy. Attracting and retaining domestic and international talent to create that value is something that UK listed company boards and their executive leadership teams strive to do every day.
And yet, very often, this talent objective is hampered by the advice and analysis of the proxy agencies and some asset managers voting against executive pay policies even when those pay levels are significantly below global benchmarks. Often the same proxy agencies and asset managers that oppose compensation levels in the UK support much higher compensation packages in different jurisdictions, notably in the US. This lack of a level playing field for UK companies is often not discussed, or if it is, the downside risks to our companies, our economy and our competitiveness are not part of the conversation.
It is essential to have a constructive discussion with all stakeholders about a topic that tends to generate emotion and strong views. If the UK capital markets community chooses to remain on the current path, the consequences of that decision should be explicitly recognised and accepted. Together with the Capital Markets Industry Taskforce, the London Stock Exchange will bring together all sides of this discussion to hear the full range of perspectives and positions. This needs to be a ‘big tent’ conversation, with listed company Chairs, Founders of potentially listed companies, Asset Managers and Owners, the Financial Reporting Council, the Investment Association, other investee groups and the proxy agencies.
We are at a pivotal moment. We should be encouraging and supporting UK companies to compete for talent on a global basis, so we remain an attractive place for companies to base themselves, stay and grow. The alternative is we continue standing idly by as our biggest exports become skills, talent, tax revenue and the companies that generate it.
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