Church vows to fight costly pay deals

The Church of England, a major institutional investor, has put British company bosses on notice that exorbitant pay deals will not be tolerated.

The Church Investors Group, which unites the Church of England and 58 related charities and organisations managing a combined £17 billion ($29.4b), has written to the 350 biggest companies on the stock market to set out how it intends to vote at this year’s annual general meeting season.

It is joining the chorus of voices expressing concern about executive pay in a year in which large numbers of companies are putting their bonus deals to a binding vote — rather than an advisory one — at their AGMs.

“We voted against two-thirds of remuneration reports that were proposed last year,” says Adam Matthews, head of engagement for the Church Commissioners — an investment fund manager that is a member of the Church Investors Group — and Church of England Pensions Board.

“We’re saying that when we see pay policies that aren’t justified we will vote against them. We want to see greater use of discretion by remuneration committees.”

Major institutional investors such as BlackRock — the world’s biggest fund manager — and Standard Life have also warned companies that they are on alert for excessive pay deals for company executives. Investors have already scored a victory this year, when Imperial Brands, maker of Gauloises and John Player cigarettes, scrapped a pay rise for its chief executive Alison Cooper.

Matthews says this year’s AGM season is important because of the number of binding votes on pay policies, which must be put forward for shareholders’ approval every three years. Annual pay deals are voted on separately each year, but this is only advisory.

He says there is “collective concern” among investors about pay deals this year, which are being put to a vote at a time when the Government is consulting on changes to the way the executive remuneration system operates.

A green paper asks whether companies should publish their pay ratio — the gap between the chief executive and the wider workforce.

The letter to FTSE 350 companies urges companies to provide information on pay ratios. It also warns that it intends to focus on climate change, water use and the way companies treat their employees.

The Church Commissioners’ largest stakes are in banking groups such as Lloyds and HSBC, supermarket group Tesco and pharmaceutical company AstraZeneca.

Matthews also warns that the investment group keeps a close interest in climate change.

In the past the church has used shareholder resolutions to challenge BP and Shell to take responsibility for their carbon footprints and limit their contribution to global warming.